Securitized reusable personal asset system

ABSTRACT

Illustratively, there can be a securitization system that is comprised of a computer or computers using a network, and a process, for the conversion of assets into marketable securities. In one embodiment, the securitization system includes a distribution system to distribute at least some of the marketable securities generated by the securitization system to one or more buyers. The process may utilize a new definition of securitization that expands the universe of securitizable assets, the universe of asset securitization methodologies, and the universe of securities that can be designed and generated thereby.

PRIORITY STATEMENT

The present patent application claims benefit from and incorporates byreference from U.S. Patent Application Ser. No. 60/872,993 filed Dec. 5,2006; this also incorporates by reference U.S. Pat. No. 6,760,709 B2issued Jul. 6, 2004, both naming Richard A. Graff as inventor.

TECHNICAL FIELD OF THE INVENTION

The technical field is computers and data processing systems. Dependingon the implementation, there is apparatus, a method for use and methodfor making, and corresponding products produced thereby, as well as datastructures, computer-readable media tangibly embodying programinstructions, manufactures, and necessary intermediates of theforegoing, each pertaining to digital aspects of wide area networkcommunications.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 illustrates an embodiment.

FIG. 2 illustrates an embodiment.

FIG. 3 illustrates an embodiment.

FIG. 4 illustrates an embodiment.

MODES

For perspective, financial engineering has developed into a complex andsophisticated subject in the last 15 years, and securitization is almostcertainly its most exciting and dynamic area. This represents a majorshift in perspective within the financial community. Although theconcept of a financial security has been familiar to investors for morethan 150 years, the concept of securitization was arcane and unfamiliarto most financial professionals as recently as 20 years ago.

Securitization has become a financial buzzword in the last 15 years, butmany investors and investment managers find it difficult to describeprecisely what securitization is. Many are also unable to distinguishthe actual investment attributes of securitized investment products fromthe advertised attributes.

These issues are more relevant today than in the past because of thebasic tenet of Modern Portfolio Theory (MPT): in reasonably efficientliquid markets, diversification lowers investment risk more than itlowers investment return. It follows from the basic tenet that portfoliomanagers generally—although not always—improve the risk/return profilesof investment portfolios by diversifying the portfolios to the maximumfeasible extent. As a result, highly diversified portfolios have come toserve as benchmarks throughout the investment industry for evaluatingthe on-going performance of investment managers.

Investment regulators, courts and legislators have embraced the basictenet of MPT as a guiding principle that financial fiduciaries ignore attheir peril. For example, in the extreme case of pension fundregulation, fund fiduciaries can be held personally liable for anysuboptimal performance of pension fund investments if they fail toensure strict adherence of pension fund investments to the basic tenetof MPT.

It follows that investment bankers have a guaranteed demand sideclientele in markets for any new investment banking products thatsecuritize assets with well-identified investment characteristics notreplicated by existing financial products. This ensures the continuingattention of the financial industry to securitization research andapplications. In particular, the financial industry—and the corporatesector in general—has incentive to understand the complete meaning andscope of the securitization concept.

One problem with new concepts is that the original definition may notconstitute the best description for purposes of fostering relatedinnovations. For example, the first definition of securitization was aworking description of the process for generating residentialmortgage-backed securities, which is essentially how securitization isstill perceived by many practitioners and academics. This is a highlysignificant and visible application in the economies of developedcountries, which may explain why the original ad hoc definition has notbeen replaced with a definition that is more conceptual, despite theboost to new product design, e.g., new types of securities, that couldresult.

Embodiments herein introduce a definition of securitization that shiftsthe focus of the process from its effect on specific assets to itseffect on the specific investment characteristics of assets in general.This shift can achieve two disparate objectives: it provides a unifyingframework for several types of financial applications that were notviewed previously as related, and it enables an economic link to beestablished from the effect of securitization on assets to the effect ofsecuritization on asset value. As a related benefit, it suggests simplecriteria for predicting the viability of new securitizationmethodologies.

This discussion examines the securitization concept and the extent towhich it has evolved since its inception. The attribute-orienteddefinition of securitization is introduced and the link from changes ininvestment characteristics to changes in value is established. Theeconomic characteristics of three broad asset classes in whichsecuritization has significant applications are examined, and the widelyvarying securitization methodologies employed in the three cases toachieve common economic objectives are discussed. Finally, some newsecuritized assets that can be created with the securitization apparatusdisclosed herein.

Definition of Securitization

The original working definition of securitization as a process togenerate residential mortgage-backed securities (MBS) was coined in thelate 1970s by Lewis Ranieri, at that time head of the then-fledglingmortgage-trading department at Salomon Brothers. The concept wasintroduced as part of a marketing program to develop a secondary marketin home mortgages by distributing the first privately generatedresidential MBS to institutional investors. The period since then haswitnessed an explosion in the generation of residential MBS (e.g., instructured form, also known as Collateralized Mortgage Obligations) andrelated fixed-income products, particularly during the last fifteenyears. Numerous weighty treatises have appeared describing the technicalstructure and investment analysis of the resulting securities. However,the treatises are more tentative when it comes to characterizingconceptually what they are describing. There is no standard definitionof securitization, and many definitions are ad hoc variations of theoriginal working definition.

Numerous examples in the relevant art demonstrate the unsettled state ofsecuritization concepts. For example, Frank Fabozzi, author or editor ofseveral how-to texts on securitized fixed income products, observes in a1998 volume on structured financial products that there is no widelyaccepted definition of an asset-backed security and describes the U.S.perception of asset-backed securities as “securities in which theunderlying assets are anything other than first mortgage loans onresidential on-site built homes.” Another contributing author to thesame volume observes that, “Exact definitions of what constitutes aninternational asset-backed security may differ . . . ”

Examination of the most recent editions of Webster's CollegiateDictionary confirms the continuing popularity of the original workingdefinition: the tenth and eleventh editions (published in 1993 and 2004respectively) include a definition of securitize (i.e., the verb thatcorresponds to the noun “securitization”) that is close to a verbanalogue of the Salomon Brothers working definition: “to consolidate (asmortgage loans) and sell to other investors for resale to the public.”The ninth edition of the dictionary (published in 1983) does not containany reference to ‘securitization’ or ‘securitize,’ which confirms thatwidespread awareness of the securitization concept is a recentphenomenon.

An apparent shortcoming of these definitions is that they do notencompass one of the most significant securities-generation businessesin which investment banks have engaged. One of the primary activities ofinvestment banks since the 1840s has been converting private firms intopublicly traded corporations, i.e., securitizing equity investments inorganized businesses.

Two slightly more conceptual definitions of “securitization” can befound in a 1996 treatise on asset-backed securities and a 1997 OxfordUniversity Press text on financial economics: (1) “the process by whichloans, consumer installment contracts, leases, receivables, and otherrelatively illiquid assets with common features are packaged intointerest-bearing securities with marketable investment characteristics;”and (2) “the process whereby financial intermediaries, banks inparticular, convert claims held on their balance sheets into marketablesecurities.”

These definitions are still somewhat limited. For example, the firstdefinition restricts securitization to pools of debt-like instruments,and the second one restricts securitization to the balance sheet claimsof financial intermediaries such as banks.

Embodiments herein shift the focus of the definition from the types ofassets to be securitized to the investment characteristics of theassets, on the assumption that investors typically base decisions onwhich investment assets they are interested in buying and how much theyare willing to pay in part on at least some of the investmentcharacteristics. For example, in the case of investment securities, oneof the investment characteristics usually appears to be thecharacteristic of limited liability, which for purposes herein isdefined as follows: an asset has the limited liability investmentcharacteristic if an equity interest in the asset does not expose itsowner to any risk of loss greater than the gross purchase price of theequity interest. For purposes herein, an asset with the limitedliability investment characteristic is referred to as a limited,liability asset.

Accordingly, consider the following definition of securitization:securitization noun: “the process whereby illiquid interests in propertyare converted into marketable limited liability securities consisting,or consisting essentially, of the investment characteristics of theoriginal interests other than illiquidity and liability exposure.” Inthis definition, it is intended that the process includes changes in theother characteristics resulting from changing the illiquidity andliability exposure.

In the case of the securitization of multiple interests in property, themultiple “interests in property” are not necessarily interests in thesame property. For example, in the case of a securitized residentialmortgage pool, the mortgages are usually loans on different properties.

This definition specifies securitization to be a process that generatessecurities and identifies the investment characteristics of the inputand output that are transformed by the process: “limited liability,”“illiquid” and “marketable.” The definition also requires securitiesgenerated by the process essentially to preserve the signatureinvestment characteristics of the input assets. In addition, thedefinition encompasses the equity securitization process that isprominent in modern market economies, it encompasses the consolidationprocess that is the subject of the definition in Webster's dictionary,and it encompasses the variations of the original working definitioncited above.

Many applications involve assets that already have the limited liabilityinvestment characteristic. Thus in many cases securitization is aprocess that improves asset liquidity without materially affecting otherasset investment characteristics for purposes of investment. Only onepoint remains to be clarified: the definition of a security, which oncespecified will complete the specification of securitization in virtuallyall cases.

Securities

The concept of a security has grown more complex over the past severalcenturies. In pre-industrial Britain and America, there were essentiallytwo basic types of interests in property, most of which (by value)related to real estate: equity interests, signifying ownership; andsecurity interests, signifying debt collateralized by the property. Atthe time, a security was considered to be documentation evidencing asecurity interest in property: either a specified property orunspecified property belonging to a specified legal entity or entities.Organized exchanges, for example, financial exchanges such as the NewYork Stock Exchange, arose to facilitate the transfer of securities thatwere more or less standardized in security rights and documentary formatand that were limited liability investments.

With the development and proliferation of the modern unrestrictedpurpose limited liability corporation in Britain and America in thefirst half of the nineteenth century, the concept of a security wasextended to include documentation evidencing ownership of shares in alimited liability corporation. Thus the concept of a security began toinclude certain types of both debt and ownership interests in organizedbusinesses.

In the twentieth century, the concept of a security was made moreprecise for legal and regulatory purposes, for example, in oneembodiment, in the federal securities law of the United States. Thatembodiment of the concept is essentially equivalent to the followingnarrow definition of a security: (1) an ownership interest in the debtor equity, or some combination thereof, of a firm (e.g., a businessentity or enterprise) or special purpose entity (SPE), said ownershipinterest not per se including an obligation or right to participate inany business or management activity of said firm or SPE, or (2) anownership interest in debt of a governmental entity. As interpreted inlaw, the definition of “security” encompasses investment contracts aswell as stock warrants and other rights to subscribe to or purchase anyof several types of securities from a firm or SPE.

This is essentially as far as the narrow definition of a securityextends. However, the financial industry has informally expanded theconcept of a security to include other types of exchange-tradableinterests in property, including so-called derivative securities such asoptions and futures. Such financial instruments are regarded assecurities for some purposes by investment regulators and financialindustry professionals, although this does not apply in the U.S. forstatutory or regulatory purposes. For example, a key difference thatdistinguishes warrants from other tradable call options from theperspectives of both the narrow definition of a security and the U.S.legal and regulatory concept of a security is that warrants raiseinvestment funds for the issuing firm in connection with issuance of thewarrants and raise additional investment funds for the firm ifexercised, whereas other tradable call options do not raise investmentfunds for the issuing entity in connection with issuance of the optionsand do not raise investment funds for the firm if the options areexercised.

The narrow definition of a security is the appropriate definition forpurposes of certain embodiments herein. It follows that a security iscomprised of an actual or potential financial obligation, for example, adebt or ownership interest, of a legal entity organized to conduct abusiness enterprise or governmental venture or to conserve or hold oneor more assets reasonably expected in totality to generate a profit,such that investment funds are raised for the entity in connection withthe creation of the obligation. Accordingly, a security involves anactual or potential financial obligation issued by a legal entity otherthan one or more natural persons, e.g., debt or equity in a corporationor SPE.

Special Purpose Entities in Securitization

For purposes of some embodiments herein, when one or more interests inproperty are securitized via the creation of a SPE to conserve or holdthe one or more interests in property, an interest in the one or moreinterests in property and an interest in the securitized one or moreinterests in property are intended to refer to a corresponding interestin the SPE.

Direct ownership of an asset comprised of one or more interests inproperty could expose an owner to potentially unlimited legal liabilityas a result of events involving the asset. For example, this could occurin the case of both tangible property and intangible property, e.g.,real estate, airplanes, mortgages and consumer loans. Securitization ofthe asset by creation of a SPE to conserve or hold the asset frequentlyconverts the asset into a limited liability asset, which can enhance thevalue of the asset.

Any incremental tax liability created by the existence of the SPE couldaffect the investment returns that the asset is expected to generate forinvestors, possibly resulting in a reduction in the market value of thesecuritized asset. For example, in the case of the United States, theloss of value is usually most significant in the case of any incrementalfederal tax liabilities, since federal tax rates are usually higher thancorresponding state and local taxes in the case of the more potentiallysignificant taxes, e.g., income taxes.

Accordingly, an embodiment of a SPE for purposes of asset securitizationis a SPE that incurs essentially as little incremental tax liability asreasonably possible. For example, in the case of the United States, thissuggests an entity that incurs essentially no incremental income taxliability, at least at the federal tax level. A pass-through entity forUnited States federal tax purposes is an example of such an entity,since it is essentially invisible to federal authorities for federal taxpurposes, e.g., a grantor trust, a limited liability company, a limitedliability partnership, a limited partnership, and a real estate mortgageinvestment conduit (REMIC).

Since a SPE that is created to conserve or hold an asset is not expectedto retain significant amounts of income, another embodiment of a SPE forpurposes of securitization in the United States is a SPE that is allowedan income tax deduction for income distributions to holders of equityinterests in the entity, at least at the federal tax level; for example,a SPE that is organized as a real estate investment trust.

In the case, for example, of SPEs that are organized as limitedpartnerships or limited liability partnerships, usually only the part ofasset equity that is represented by marketable limited liabilitypartnership interests is actually securitized. However, this usuallyamounts to at least eighty percent of the equity in the SPE, andfrequently amounts to as much as ninety-nine percent or more.

In an embodiment, the SPE is bankruptcy remote, or possibly sometimeseven bankruptcy immune. However, a bankruptcy remote SPE may not befeasible in all cases. For example, the essential elimination ofbankruptcy risk from the SPE capital structure may be infeasible withinthe securitization cost constraints.

Although the SPE in a securitization process is usually established fora specific securitization, there can be cases in which a single SPE isestablished to accommodate a series of securitizations. For example,this could occur in order to avoid duplicative costs associated withcreating a series of SPEs in situations wherein the appropriateinvestment characteristic modifications can be accomplished at lowercost with fewer entities.

There can be cases in which there is an entity for an equity interest ina securitized asset that has no material effect on the investmentcharacteristics of the securitized asset. For example, in the case ofstock, nominal ownership of the equity interest can be held by aninvestor's brokerage firm, or the stock can be held in the form ofAmerican Depository Receipts in the case of shares whose registeredownership resides offshore, with essentially no impact from aninvestment perspective on the investment characteristics of the stock.

In this way, there can be a concatenated sequence of entities for asecuritized asset. However, such a concatenated sequence can be regardedfor purposes of some embodiments herein as a single entity.

Economics of Securitization

The sale of assets is a way for businesses to raise capital that is lessrisky than borrowing and frequently is also less costly. Securitizationis financial technology that selectively alters the investmentcharacteristics of assets to make them more attractive to buyers.Accordingly, securitization is capital funding technology for businessesand governmental entities.

For example, securitization enables lending institutions to recycletheir operating capital by selling loans. A process closely akin tosecuritization enables farmers to alter their capital structure at lowcost by preselling future output. Securitization also enables firms toraise business capital by selling ownership interests in themselves.

The microeconomic issue in securitization is whether the seller would bebetter off selling the unsecuritized asset or a securitized version ofthe asset. The answer depends upon three amounts: the change in marketvaluation generated by securitization, the cost of implementing thesecuritization, and the present value of the future cost of maintainingthe securitization structure. The net effect can be determined in twostages: the effect on asset value in the absence of the securitizationcosts, and the incremental effect due to the costs.

The market valuation of the asset both before and after securitizationis the price equilibrium between the supply and demand curves forfungible investment interests in the asset. In this context, pricerefers to the transaction price between buyers and sellers. However, thenet sale price is the seller inducement that actually determines thesupply curve, and the supply curve represents the seller inducement plusseller transaction costs. Similarly, the gross purchase price is theprice hurdle that actually determines the demand curve, and the demandcurve represents the price hurdle minus buyer transaction costs.

The effect of securitization on asset valuation is determined by itseffect on the supply and demand curves. Since the supply curve isdetermined by capital funding considerations, it is inelastic. Itfollows that the supply curve is a vertical line. Accordingly, thesupply curve is unaffected by securitization. For example, the objectivecould be to recycle the capital used to create the asset, which could bea pool of mortgages. In this case, the supply curve represents theentire supply of the asset.

The demand curve is affected as follows: the reduction in illiquidityand liability exposure leaves previously existing interest amongpotential investors unreduced, since reductions in illiquidity andliability exposure cannot diminish investor interest if the otherinvestment characteristics remain materially unaffected for purposes ofinvestment. In addition, if there is elasticity in the demand curve,then reduced illiquidity and liability exposure generates incrementaldemand among previously uninterested investors by reducing the buyerprice hurdle.

There must be positive elasticity in the expected demand function forthe asset, since otherwise there is no expected price benefit to justifythe cost of securitization. Positive elasticity of demand is sufficientto ensure that costless securitization generates incremental demand.Positive elasticity also ensures that there is at most one priceequilibrium. This raises the demand curve. Asset value is the price thatequilibrates supply and demand. Since securitization leaves the supplycurve unchanged and raises the demand curve, the following result isestablished:

Proposition. Assume that securitization does not affect the supply curvefor an asset, and that there is elasticity in the demand curve for theasset. Then costless securitization increases the market valuation ofthe asset.

Accordingly, if the expected increase in valuation due to securitizationexceeds the cost of implementing the securitization plus the presentvalue of the future cost of maintaining the structure, thensecuritization is expected to be a value-creating process.

The Law of Demand implies that there is negative elasticity at everypoint in the demand curves of essentially all assets. Althoughexceptions to this rule may exist under some circumstances, e.g., Giffengoods and Veblen goods, the known potential exceptions are consumerproducts and are unlikely to occur in the investment domain.

If the asset supply is elastic with respect to price, thensecuritization changes the supply curve as well as the demand curve. Inthis case, the effect of securitization on market price becomes morecomplicated. For example, if securitization reduces transaction costsfor potential sellers, then securitization reduces the transaction priceneeded to generate the seller inducement. This lowers the supply curve,which could reduce the market price.

In the case of initial public offerings (IPOs), individuals with sharesand options on shares prior to the IPO frequently commit not to sell anyof the shares for several months after the IPO. This reduces the riskthat the unseasoned secondary market for the new offering could bedepressed by the supply elasticity of the pre-IPO shares.

A qualitative observation about the costs suggests additionalconclusions about securitization. It suffices to note in this regardthat some cost components are fixed and that the variable componentsincrease less rapidly than the value of the asset. This implies thateconomies of scale and diseconomies of small scale are considerations indetermining which—if any—securitization methodologies are viable in eachsituation.

For example, residential mortgages that qualify for default insurancefrom any of the mortgage conduit government-sponsored enterprises (GSEs)are too small for securitization of the individual mortgages to beeconomically viable. Accordingly, consolidation of the assets into poolsof mortgages is inevitable in any securitization methodology for theseassets.

This raises the question of the impact of pooling on asset value. Ingeneral, the impact is complicated in the case of illiquid assets andheterogeneous investor demand, although several cases of this will bediscussed. However, in one case the impact is simple: the pooling ofassets with homogeneous investment characteristics into a new asset withthe same investment characteristics as the individual pooled assets. Inthis case, the aggregate demand for assets with essentially the sameinvestment characteristics as the individual assets in the pool isunreduced by consolidation of the assets into the pool. Accordingly, thevalue of the new asset is at least as much as the sum of the values ofthe component assets.

The creation of a secondary market for residential mortgages via MBS isthe canonical example of securitization that involves asset pooling.Ranieri estimates that creation of the secondary market reduced theaverage cost of home mortgages in the U.S. by two hundred basis points.The reduction in mortgage interest rates in turn triggered the recentrises in demand for home ownership, contributed to the dramaticexpansion of the U.S. economy over the last fifteen years, and fueled ahousing boom that has significantly increased the net worth of manymillions of homeowners.

This section relates the impact of securitization on investmentcharacteristics to the impact of the process on value. The constraintthat the process only impact the investment characteristics throughreductions in illiquidity and liability exposure implies thatsecuritization creates value before implementation costs are considered.Asset transformations that violate this constraint do not necessarilypreserve asset value, even if they are costless.

Securitizable Assets

Major portions of several asset classes have been securitized by thefinancial industry. The securitization Methodologies vary for differentasset classes, but the economic rationale for the variations frequentlybecomes apparent once differences between the investment characteristicsof the assets are taken into account. Three broadly defined assetclasses in which securitization has had a role in developing secondarymarkets are fixed-income assets, tangible assets, and firms. These assetclasses are distinct, with each class possessing signature investmentcharacteristics not associated with the other two classes.

Fixed-Income Assets

Fixed-income assets are financial obligations characterized by thespecification of the following: the identity of an obligor; one or morepayments for specified positive amounts to be transferred from theobligor to the asset holder by corresponding specified dates; andrecourse of the asset holder in event of payment default to specifiedproperty rights of the obligor that are intended when the obligation iscreated to be comparable in value to the obligation value during thelife of the obligation. The obligation is discharged once all paymentshave been made as specified or, in event of default, once the defaultrecourse has been resolved.

Most of the specifications that characterize a fixed-income obligationare defined for legal and investment purposes in the defining documentfor the obligation, although some—such as default recourse—may bespecified in whole or in part by the legal statutes that relate tovarious types of financial obligations. For example, in the UnitedStates, federal bankruptcy law specifies lessor default recourse inevent of lessee bankruptcy.

The investment characteristics of fixed-income assets differ from theinvestment characteristics of most tangible assets and firms in that feesimple ownership of tangible assets and firms includes residual equityrights. There is no guarantee that residual equity rights will generateany specified level of investment income, and there is no defaultrecourse to alternative property rights if the investment income failsto reach expected benchmarks.

Fixed-income assets can be either intangible property or tangibleproperty, or a mix of both intangible and tangible property. Forexample, fixed-income assets that are comprised of debt are intangibleproperty, whereas fixed-income assets that are comprised of one or morevested term of year ownership interests in leased tangible property arethemselves tangible property. Short-term receivables are intangibleproperty that are regarded as tangible assets for accounting purposes,but not for purposes herein.

Fixed-income assets in the U.S. are comprised primarily of governmentdebt, corporate debt and mortgage debt. Market-based valuations offixed-income obligations depend on several quantifiable systematic riskfactors, including the following: the risk-free benchmark yield curve,default risk, average life, default recourse, prepayment risk andrelative liquidity. For example, the relevant default recourse attributefor purposes of fixed-income pricing is the expected loss in event ofdefault, which is quantifiable via modeling. Prepayment risk can also bequantified by modeling.

Most fixed-income investment risk is systematic when the obligations areincurred (this does not apply to lower grades of high yield corporatedebt, which resemble corporate equity more than debt for investmentanalysis purposes). However, in many cases the proportion of investmentrisk that is systematic declines as time passes due to the absence ofinformation updates on the risk factors. For example, mortgagor creditreport updates and collateral valuation updates are unavailable in thecases of most residential mortgages and many commercial mortgage loansto private borrowers.

Tangible Assets

The legal description of tangible property is the definition of atangible asset for purposes of some embodiments herein: property thathas physical form and substance and is not intangible; that which may befelt or touched, and is necessarily corporeal. Accordingly, theexpressions tangible asset and tangible property are equivalent in thisdiscussion.

Tangible assets can be grouped according to various broad physicalattributes: real property or personal property; durable, storable orperishable; consumable, recyclable or reusable; commodity ordistinctive. These attributes are of varying significance to investmentcharacteristics. For example, consumable and recyclable assets areusable by owners only once, since users do not retain residual equity inrecycled resources derived from used assets. Accordingly, owners ofconsumable and recyclable tangible assets have the same three investmentalternatives available at every point in time: sell the asset; store theasset for future use subject to perishability constraints; or consumethe asset by using it. By contrast, owners of reusable assets have otherinvestment alternatives: sell the asset; store the asset for future use;use the asset without sacrificing the potential for further use; or rentthe asset to another user.

The storage of reusable assets is usually an inefficient investmenttactic if there is demand interest for use of the assets from potentialrenters. Accordingly, the efficient alternative for investors who do notacquire reusable assets for their own use is to generate investmentincome by renting the assets.

In the case of most rentable assets, significant cost is involved fromthe investor perspective in switching renters and from the renterperspective in switching assets. In such cases, owners and rentersusually seek to minimize their respective future costs by negotiatingleases. The leases encumber lessor rights to control the assets forspecified time intervals by transferring selective rights to asset useto the lessees in return for specified rental payments.

The market value of an unleased reusable tangible asset is the presentvalue of the rights to future asset use. Accordingly, the execution ofthe lease reduces the investment risk exposure of the asset holder tothe tangible asset market in the same way that laying off bets lowersbookie risk exposure to the outcome of wagers. If the market value ofrights to future asset use rises, then lessees capture part of the risein market value by using the asset and paying below-market rent.Conversely, if the market value of rights to future asset use falls,then lessees absorb part of the decline in asset value by payingabove-market rent for asset use until their leases expire. Since aportfolio of leases is a fixed-income asset, these considerationsestablish the following results:

Lemma 1. For investment analysis purposes, a leased asset is the sum ofa fixed-income asset and future ownership of the unencumbered asset.

Lemma 2. Leasing changes the investment characteristics of tangibleassets by reducing the exposure of investors to investment risk in thetangible asset market and increasing the exposure of investors toinvestment risk in the fixed-income market.

It follows that the investment characteristics of individual leasedassets differ materially when the proportions of their investment valuerepresented by the leases differ materially, even if the assets have thesame investment characteristics when unencumbered by leases.Accordingly, the investment characteristics of leased tangible assetsare more complex than the investment characteristics of consumable,recyclable, and unencumbered reusable tangible assets.

Real Assets

For legal purposes, property is classified as either real property orpersonal property. The difference is related to the concept of alocation for the property: real property and is immobile and has anessentially permanent location, whereas personal property is mobile andcannot be assumed to have a permanent location. Real property isassociated with land. For purposes of this discussion, the expressionsreal asset and real property are equivalent. For some purposes herein, areal asset can be a tangible asset.

In an embodiment, a real asset is deeded. Deeded real assets areexamples of deeded assets but, as discussed below, many personal assetscan also be deeded. A deed to an asset conveys a fee interest in theasset, e.g., an ownership interest in the asset that is or may becomepossessory. In short, a deeded interest in an asset is a fee interest inthe asset, a fee interest in an asset is an ownership interest in theasset, and an ownership interest in the asset is an equity interest inthe asset. Accordingly, a deeded interest in an asset is an equityinterest in the asset. Similarly, a fee interest in an asset is anequity interest in the asset.

Commercial real estate, residential real estate and farmland areexamples of real assets, and there are others. For example, a deededmineral right is a real asset and a deeded water right is a real asset.In these cases, the deeded asset is a fee interest in a real asset,e.g., land that can either include or not include a fee interest insurface land. In one embodiment, a deeded mineral right does not includea fee interest in surface land. In another embodiment, a deeded waterright does not include a fee interest in surface land.

The property rights associated with a deeded asset can be conveyed byone or more deeds. It follows that a pool of deeded assets is a deededasset, e.g., a pool of deeded real assets is a deeded real asset, a poolof deeded tangible assets is a deeded tangible asset, and a pool ofdeeded intangible assets is a deeded intangible asset.

An asset is a bundle of property rights that has value. A fee simpleinterest in an asset represents ownership of the bundle of propertyrights defined by the asset. A fee interest in the asset other than afee simple interest in the asset represents ownership of a subbundle ofthe bundle of property rights defined by the asset.

A component of an asset is a subbundle of the bundle of property rightsdefined by the asset. Accordingly, a fee interest in an asset other thana fee simple interest in the asset represents ownership of a componentof the asset. A component of an asset that has value is an asset.

Financial applications can involve qualified fee interests in assets. Aprimary qualified fee interest in an asset is a fee interest in theasset that terminates upon an occurrence or nonoccurrence of somespecified event or combination of events. A secondary qualified feeinterest is a fee interest that commences upon an occurrence ornonoccurrence of some specified event or combination of events. Aqualified fee interest is a fee interest that is either a primaryqualified fee interest or a secondary qualified fee interest. Aqualified fee interest can be either vested or conditional. A deeded feeinterest, e.g., a deeded qualified fee interest, is a fee interest inwhich the associated property rights are defined by at least one deed.Examples of a primary qualified fee interest include a term of yearsinterest and an augmented term of years interest. Examples of asecondary qualified term of years interest include a remainder interestand a complementary remainder interest. A deeded augmented term of yearsinterest is an example of a deeded qualified fee interest in which theassociated property rights can be defined by one deed or two deeds.

A deeded component of an asset can be defined by a deeded qualified feeinterest in the asset in the case of both real and personal assets. Adeeded qualified fee interest in a real asset can be a real asset or apersonal asset, depending on whether the property represented by thequalified fee interest is immobile or mobile. A deeded qualified feeinterest in a personal asset is a personal asset, and a deeded qualifiedfee interest in a tangible asset is a tangible asset.

A pool of deeded mineral rights is a deeded real asset consistingessentially of (or consisting of—depending on the embodiment) deededmineral rights. Similarly, a pool of deeded water rights is a deededreal asset consisting essentially of (or consisting of—depending on theembodiment) deeded water rights. A deeded interest in mineral rights isa real asset. For example, a deeded qualified fee interest in at leastone mineral right is a real asset. Similarly, a deeded interest in waterrights is a real asset. For example, a deeded qualified fee interest inat least one water right is a real asset.

Deeded mineral rights reflect a deed to a fee interest in at least onemineral right in a real asset. Deeded mineral rights can also reflectmore than one deed, wherein each said deed is a deed to a fee interestin at least one mineral right in a real asset. Similarly, deeded waterrights reflect a deed to a fee interest in at least one water right in areal asset. Deeded water rights can also reflect more than one deed,wherein each said deed is a deed to a fee interest in at least one waterright in a real asset. More generally, a deeded interest in an asset,e.g., a real asset or a personal asset, reflects at least one deed,wherein each said deed is a deed to a fee interest in the asset. Forexample, the interest can be a component of the asset, e.g., a componentdefined by a qualified fee interest in the asset.

Another example of a real asset is a timber right, e.g., a right to cutand remove timber from specified real property. Still another example ofa real asset is an air right, e.g., ownership of space above specifiedreal estate. Both timber rights and air rights are immobile assets.Accordingly, a deeded timber right is a real asset, and a deeded airright is a real asset.

Mobile Air Rights

A mobile air right is a property right that can be created by agovernmental authority. A mobile air right conveys to its owner anexemption at least one regulatory restriction on real estateimprovements in a specific volume of space above unspecified realestate. In an embodiment, the right includes an exemption from at leastone zoning restriction. In different embodiments, the right may includeor not include a restriction on the space, e.g., a height limit onimprovements. A height limit may be specified either in absolute terms,e.g., with respect to the ground, or in relative terms, e.g., withrespect to a zoning restriction or multiple zoning restrictions.

In contrast to real air rights, a mobile air right is a personal asset.In order to implement the right, the mobile air right owner specifiesthe real estate, subject to any restrictions included in the right. Thisis a one-time specification and converts the mobile air right into animmobile asset. For example, the mobile air right can be attached to areal estate parcel. Accordingly, a mobile air right is usually aconsumable asset: following an instance of use, it is immobile.

In one embodiment, the air right can only be used to support one set ofreal estate improvements. In another embodiment, the air right can bereused, although only above the real estate previously specified by theowner. In still another embodiment, the air right can be reused andbecomes mobile again once the improvements are removed from the space towhich the air right was affixed. In this embodiment, the air right is areusable asset. In some embodiments, the addition of improvements tospace designated by the owner a mobile air right for use of the airright must commence within a prespecified amount of time following thedesignation. In some of these embodiments, the improvements must also becompleted within a prespecified amount of time following thedesignation. In some of these embodiments, some of the improvements mustbe completed within a prespecified amount of time following thedesignation.

In other embodiments, there are no time restrictions on the mobile airright with regard to the amount of time allowed for construction ofimprovements in space designated for use of the mobile air right tocommence. However, in some of these embodiments, a change ofgovernmental restrictions with regard to construction within thedesignated space before the commencement or completion of constructioncan supersede the regulatory exemption represented by the mobile airright. In other of these embodiments, the exemption conveyed by themobile air right is absolute and cannot be superseded by subsequentregulatory changes once a space intended for use of the mobile right hasbeen designated.

In one embodiment, a mobile air right can only be used within thejurisdiction of the governmental authority that issues the air right. Inother embodiments, a group of governmental authorities with differentregional jurisdictions cooperate in jointly recognizing mobile airrights issued by individual members of the group. In this case, a mobileair right issued by any member of the group can be used throughout thecombined jurisdiction of the members of the group.

A mobile air right in combination with a deeded fee interest to spaceabove a real estate parcel can expand the right of the deeded feeinterest owner to add real estate improvements in the space. However, amobile air right alone does not convey a right to add improvements in avolume of space, only an exemption from one or more governmentalrestrictions on development of the space.

Mobile air rights can be issued to resolve problems that arise inconnection with governmental regulation of real estate development thatotherwise could involve lengthy and expensive litigation. For example, acommercial building with an unutilized air right is located in aresidential area. The municipal government and the local residentsstrongly object to any attempt by the building owner to extend thebuilding upward, but zoning regulations permit an upward extension andit is infeasible to modify the regulations to prevent the extension. Insuch a case, the building owner could view any opposition to an upwardextension as a taking of an air right attached to the building that isentitled to compensation.

Under current conditions, the only conventional way for the buildingowner to realize the value of the air right is to attempt to constructan upward extension. The attempt is certain to be time-consuming andexpensive, might not be successful, might lead to time-consuming andexpensive litigation, and might not result in any financialcompensation. In short, the attempt might be a financial debacle.

Another way for the building owner to realize the value of the air rightis by converting it into a mobile air right. For example, the owner canoffer the municipal government to exchange the unutilized real air rightassociated with the building for a mobile air right, e.g., to exchangethe unutilized space above the building for an equivalent orcorresponding volume of mobile space. If the government agrees, then thebuilding owner acquires a generic air right that could be viewed forinvestment purposes as a consumable tangible asset. The building ownercan store the asset as an investment in air rights value, use itimmediately or later to support construction of an upward extension to abuilding at another location, or sell it to another investor or realestate owner.

In one embodiment, the owner converts an unutilized volume of air spaceassociated with deeded real property into a corresponding volume definedby at least one mobile air right, wherein the corresponding volume isdetermined by a predetermined rule or formula of the issuinggovernmental authority. For example, one example of a formula is toissue at least one mobile air right to the same volume of space that theowner detaches from the real property, although other formulas and rulescan be applicable. In another embodiment, the governmental authority andthe real property owner negotiate the volume of space associated withthe at least one mobile air right that is issued in return for thedetachment of at least one air right from real property. In stillanother embodiment, a fee is imposed by the governmental authority aspart of the conversion.

An organized market for mobile air rights can provide real estate ownerswith a market to value the unutilized air rights associated with theirproperty. It can also provide real estate owners with a way to realizevalue from a component of their real property that has intrinsic valuein cases in which there is no other mechanism for real estate owners toextract any wealth.

Mobile air rights can be issued by governmental authorities in unitsthat can be unbundled, wherein each unit conveys mobile air rights to aspecified volume of mobile space. Such units are fungible mobile airrights. An organized market for the units, for example, on an organizedexchange, e.g., a commodity exchange or a private financial exchange,can allow the marketplace to create rapid and low-cost solutions tozoning-related questions that now consume large amounts of municipaladministrative time and money.

Firms

It was established above that firms have investment characteristics thatdiffer from the characteristics of fixed-income assets. In addition,firms are business organizations, which are distinct from tangibleassets. The assets of the firm extend beyond tangible assets to includeintangible sources of value such as organizational structure,intellectual property, client relationships, and the business experienceand proprietary expertise of its skilled personnel. For example, sharesin Exxon represent an ownership interest in a securitized oil business,not an ownership interest in securitized petroleum. Similarly, shares inAnglo-American Corporation represent an ownership interest in asecuritized gold mining business, not an ownership interest insecuritized gold bullion.

The differences that distinguish firms from tangible assets such as oilor gold bullion are evident and include the following: (1) a firm has abusiness strategy, a tangible asset does not; (2) a firm has aninvestment strategy, a tangible asset does not; (3) a firm can respondto change in the market for a tangible asset (oil in the case of Exxon,gold in the case of Anglo-American) by changing its business andinvestment strategies, a tangible asset cannot; (4) a firm can maketactical mistakes in operations, a tangible asset cannot.

These differences imply corresponding differences between the respectiveinvestment characteristics of firms and tangible assets. In particular,it implies differences between the following: shares in Exxon andmarketable ownership certificates for stored petroleum; shares inAnglo-American and marketable ownership certificates for warehoused goldbullion.

This is not meant to deny the significance of the relation betweenconditions in the markets for tangible assets and prices of corporationsin companies that produce and market products based on those tangibleassets. For example, it is evident that the business prospects of Exxonare highly correlated with conditions in the spot market for oil, justas the business prospects of Anglo-American are highly correlated withconditions in the market for gold bullion. Accordingly, investors canimplement indirect investment strategies based on their expectationsconcerning future conditions in the oil and gold markets respectively byinvesting in shares of oil companies such as Exxon and gold miningcompanies such as Anglo-American.

However, the investment characteristics of such companies also includeexposure to business risk factors that have little or nothing to do withconditions in the markets for tangible assets. For example, Enron was anenergy company that focused on the natural gas sector of the energyindustry, but the investment characteristics of shares in its corporatedebt and equity after mid-2001 were determined by business factors thatwere essentially uncorrelated with the market for natural gas.

Analogous examples emerged recently in the residential real estatefinance industry. In recent years the government-sponsored enterprises(GSEs) Fannie Mae and Freddie Mac have been the largest and mostprominent publicly traded firms in the business of investing inresidential real estate mortgages. However, from 2002 through 2005 theprices of shares in these GSEs were driven downward by factors relatedto management problems and tactical mistakes in operations rather thanto conditions in the market for residential real estate debt.

Firm-Like Characteristics in Tangible Assets

The difference between reusable tangible assets and firms becomessmaller at certain times. In particular, when it is time to considerre-leasing a reusable tangible asset, decisions must be made by or onbehalf of asset owners concerning the investment characteristics ofprospective new leases.

If the owners are passive investors, then it follows that the tangibleasset must sporadically include a limited scope business strategy forre-leasing as part of its investment characteristics. In many cases, thebusiness strategy disappears from the significant investmentcharacteristics of the asset once re-leasing is concluded.

This does not imply that reusable tangible assets are equivalent tofirms. For example, firms have unrestricted investment strategies thatrespond to changes in the marketplace. By contrast, the primaryinvestment strategy for reusable assets is to maintain the physicalasset. This strategy is restricted and largely independent of events inthe marketplace. Furthermore, leases frequently transfer control overimplementation of the strategy to the lessees.

This also does not imply that frequent re-leasing necessarily makesreusable assets more like firms. For example, large apartment buildingsre-lease almost continuously, but usually restrict their operatingstrategies to selection of credit benchmarks for tenants andstandardized leases in which the only items to be negotiated are monthlyrent and lease term. Accordingly, some business strategy is a necessaryfeature of apartment building investment characteristics, but thenecessary strategy is more restrictive than most re-leasing strategiesfor commercial real estate. It follows that the strategy could beregarded as part of the economic geographical location or position ofthe asset rather than as a business strategy in the usual sense offirms.

Fixed-Income Securitization

One investment characteristic that distinguishes many forms of illiquidcreditworthy debt from the bonds of governments and publicly tradedcompanies is the absence of information updates on the systematic riskfactors used by the fixed-income marketplace to price the debt. Forexample, mortgagor credit report updates and collateral valuationupdates are unavailable in the cases of residential mortgages and manycommercial mortgage loans to private borrowers.

In the case of residential mortgages, requirements for such updateswould constitute both an unwelcome invasion of privacy and a diseconomyof small scale that increases the cost of borrowing to an unacceptableextent. Absence of such updates is also a factor in pricing loans tosome commercial entities where diseconomy of small scale is not anissue. For example, the 1991 bankruptcy of the private real estateinvestment firm Olympia and York and the low market value of collateralsupporting the firm's commercial debt were surprises to the firm'slenders and to the financial community in general.

The absence of information updates on the systematic risk factors leadsto steadily increasing idiosyncratic investment risk with the passage oftime. This results in a steady decline over time in the proportion ofinvestment risk that is systematic.

Although some decline in the proportion of systematic risk isunavoidable, the magnitude of the decline can be reduced in manysituations by pooling fixed-income assets with similar systematic riskcharacteristics and similar amounts of total investment risk. Thiscreates a new fixed-income asset with similar initial systematic risk tothe individual pool components and a more stable proportion ofsystematic investment risk over time.

Asset pooling represents a way in many cases to circumvent the steadilyincreasing idiosyncratic risk in the absence of information updateswhile preserving the signature investment characteristics of the pooledassets. It follows that asset pooling is useful in many fixed-incomesecuritizations.

The universe of fixed-income assets is closed under consolidation bypooling, and the systematic risk factors of the new asset can bedetermined with varying degrees of difficulty from the systematic riskfactors of the component assets. This determination is simpler if thecomponent assets have essentially homogeneous systematic riskcharacteristics, as in the case of many residential mortgage poolscreated by the GSEs.

For example, the pooling of fixed-income assets with relativelyhomogeneous systematic risk factors, origination dates and originators,such as residential mortgages, can generate a new fixed-income assetwith essentially the same systematic risk factors as the individual poolcomponents and lower securitization costs than would be involved inseparately securitizing the components. For investment analysispurposes, homogeneity of origination dates and originators is apractical proxy for homogeneous initial levels of idiosyncratic risk.The GSEs nurtured the development of the secondary residential mortgagemarket by successfully promulgating the standardization of home loandocumentation and covenants when the secondary market began to emerge.

Diversification via pooling reduces the amount of any decline in theproportion of systematic investment risk over the life of the asset. Inthe case of residential mortgages, pooling also materially reduces theidiosyncratic component of prepayment risk. Prepayment risk is acombination of systematic and idiosyncratic risk: systematic risk due toborrower refinancing opportunities that result from changing interestrates and idiosyncratic risk due to borrower refinancings necessitatedby changing individual circumstances such as homeowner relocations.

Relative homogeneity of systematic risk across the individualresidential mortgages of many pools suggests that the market perceivesinvestment interests in the pools prior to securitization as equivalentor preferable to investment interests in the individual mortgages, i.e.,pooling homogeneous home mortgages does not lower aggregate demand forthe mortgages. Accordingly, although it is the mortgage pools that aresecuritized rather than the individual mortgages in the pools, thesecuritization of pools of essentially homogeneous residential mortgagesaccomplishes essentially the same objectives as the securitization ofthe individual mortgages, which otherwise is probably infeasible. On theother hand, the benefits of securitization via pooling become lesscertain and less stable over time as risk inhomogeneities increaseacross the assets selected for the pool.

In the simplest case, a securitized pool has one capital class and oneclass of shares for that capital class. In this case, the shares arefungible and are referred to as pass throughs or pass-throughsecurities. In the case of a securitized pool of mortgages, the sharesare known as pass-through mortgage-backed securities, e.g., pass-throughresidential MBS.

The fixed-income universe is closed under the creation of tranches inpools of fixed-income assets. The economic rationale for tranchingpools, aka ‘slicing and dicing,’ is to repackage much of the economicvalue of the pooled assets in securities with less (and simpler)prepayment risk and/or default risk than shares in the entire pool. Theobjective can be to increase in overall demand for investment interestsin the pool such as, for example, equity interests, by expanding theinvestor clientele for the senior interests without a correspondingreduction in the investor clientele for the remaining interests.

The extent to which tranching accomplishes this objective in general isuncertain. Although some simple tranche designs have experiencedpersistent market acceptance, some complicated designs have lostviability as the clientele for the most subordinated tranches achievedgreater understanding of the investment risk associated with theinterests and repriced the tranches accordingly.

As with securitization in general, the key to successful tranching is topredict the overall impact on incremental demand. This is easier to dowith tranches that have similar investment characteristics to securitiesfor which a well-defined clientele already exists.

Commercial real estate mortgages are frequently securitized by poolingand tranching in the same way as residential mortgages and for analogousreasons. Although the individual mortgages are frequently large enoughto support marketable pass-through securities without any need forpooling, loan investors suffer from the same deficiency of informationupdates on the collateral that is a feature of residential mortgages.Since the only default recourse of mortgage investors is normally to thecollateral, the absence of collateral valuation updates aloneconstitutes a potential concern for secondary mortgage marketparticipants that highlights the role of securitization methodologiesthat involve pooling. On the other hand, prepayment risk is usually lesssignificant than in the case of residential mortgages due to thefrequency of loan provisions that impose prepayment penalties andlockouts. Mortgage investors also suffer from an absence of creditreport updates in the case of private borrowers.

The positive impact of commercial mortgage pooling on market value isnot as inevitable as in the case of residential mortgages because theloan investment characteristics are more heterogeneous. For example,commercial real estate mortgage covenants and documents have proven moreresistant to standardization than in the case of residential real estatemortgages, due largely to differences between the financial resourcesthat support debt service of residential and commercial mortgages. Theincome stream of the borrower is the primary resource in the case ofresidential mortgages, whereas the income stream of the mortgagedproperty is the primary resource in the case of commercial mortgages.

Mortgagors of commercial property rationally seek to reduce the defaultrisk that arises from uncertainty in the income stream generated by theproperty. Accordingly, borrowers seek customized covenants to minimizetheir default exposure due to idiosyncracies in the income stream bypassing the idiosyncratic risk through to the lender.

The real estate income stream has idiosyncracies because tenants requestcustomized lease provisions in response to idiosyncracies in tenantbusiness activity that generate lease default risk that could be passedthrough to the landlord. Thus the driving economic force behind borrowerresistance to commercial mortgage standardization is the idiosyncraticrisk component of tenant business activity, which is unlikely todiminish in the future.

Commercial real estate mortgage loan quality depends as much on leasesand lessee credit as on the location and physical characteristics of theproperty and the credit of the property owner. It follows that poolingnecessarily involves loans with less similar investment characteristicsthan in the case of residential loans: in particular, less similarcredit quality, maturity, default protection and origination dates.Since tranching is not certain to add value in general, it is reasonableto expect the securitization of commercial mortgages to be a morecomplex and dicey process than in the case of residential mortgages.Nonetheless, the market for commercial mortgage-backed securities (CMBS)has experienced strong growth in recent years.

Mortgages on personal small aircraft usually suffer from diseconomies ofsmall scale and information update deficiencies for secondary investmentmarket purposes, for example, absence of collateral valuation updatesand absence of mortgagor credit updates. The aircraft, usually owned byone or more natural persons and usually operated by pilots not licensedto operate aircraft for hire, for example, one or more of the owners,are operated essentially for noncommercial purposes, for example,personal transportation or enjoyment. The pilots usually have some formof noncommercial pilot license, for example, a private pilot license;for example, in the United States, wherein a license is also known as acertificate; a private pilot certificate; other examples ofnoncommercial pilot licenses in the United States are sport pilotcertificates and recreational pilot certificates. Thus no widespreadbusiness motives exist among personal small aircraft owners to opposethe standardization of mortgages on the aircraft. Accordingly, thesecuritization of pooled mortgages on personal small aircraft is aviable securitization methodology. In another embodiment, thepersonal-small-aircraft mortgages have relatively homogeneous systematicrisk and standardized loan documentation and covenants.

The entire mortgage on a personal small aircraft may be sold forsecuritization by the loan originator or a minority ownership interestin the mortgage may be retained by the loan originator. Accordingly, theindividual components in each pool of interests in personal smallaircraft mortgages can include either individual mortgages or partialownership interests in individual mortgages or both individual mortgagesand partial ownership interests in individual mortgages. In any case,each pool includes ownership interests in many different aircraft withmany different owners: for example, at least fifty different aircraft,almost always at least one hundred different aircraft, usually at leasttwo hundred different aircraft, frequently at least five hundreddifferent aircraft, and in some cases at least one thousand differentaircraft.

Other types of assets than mortgages on personal small aircraft can insome cases be included in the pool, but the entire pool by valueconsists essentially of fixed-income assets. In an embodiment, at leasthalf of the pool by value consists of individual mortgages on personalsmall aircraft and partial ownership interests in individual mortgageson personal small aircraft, and frequently the entire asset pool byvalue consists essentially of (or consists of—depending on theembodiment) such interests in mortgages on personal small aircraft.

A personal small aircraft can be any of several types of personal smallaircraft. For example, a personal small aircraft can be a flying car ora roadable aircraft, wherein said personal small aircraft can be eithera jet aircraft or a propeller driven aircraft. A personal small aircraftcan also be a light sport aircraft, an ultralight aircraft, or amicrolight aircraft. In one embodiment, at least half of the interestsin mortgages on personal small aircraft in the pool by value aremortgages on a type of personal small aircraft, and frequentlyessentially all of the pooled interests by value in mortgages onpersonal small aircraft are comprised of interests in mortgages on atype of personal small aircraft.

Unlike residential real estate mortgages, government debt and corporatedebt of publicly traded corporations is not usually pooled prior tosecuritization into bonds, in large part because quarterly and annualbalance sheet and income statement disclosures required by federal andstate law from governments and by the Securities and Exchange Commission(SEC) from publicly traded companies normally provide the periodicinformation updates needed to maintain the systematic portion of bondinvestment risk at an adequate level. Furthermore, pooling does notcontribute significantly to prepayment risk reduction or simplification,because government and corporate bond prepayment risk is already smalland relatively simple to model. In particular, the idiosyncraticcomponent of prepayment risk is usually small to nonexistent, andinterest rate-based systematic refinancing opportunities are exercisedfar less frequently by government and corporate borrowers than byresidential mortgagors because these borrowers usually access the debtmarkets throughout the economic cycle. This implies that their cost ofdebt is an average of interest rates across the economic cycle ratherthan one or two interest rate values from a single part of the cycle,which lessens their incentive to refinance at every interest rate-drivenopportunity.

Similar considerations apply to the securitization of bondable netleases of equipment and single-tenant real estate. In cases in which themarket value of a lease is large enough to justify the cost ofstand-alone securitization, the lease can be bundled with selectedownership rights in the leased property to form a securitizedfixed-income obligation with investment characteristics that closelyresemble unsubordinated secured debt of the lessee. In addition, thereis usually no prepayment risk associated with the asset, since thefinancial obligation is lease-based.

Accordingly, in the case of government and publicly traded corporatelessees with sufficiently high credit ratings, e.g., investment-grade,quarterly and annual balance sheet and income statement disclosuresprovide the periodic information updates needed to prevent thesystematic portion of investment risk from declining significantly. Thusthe asset investment characteristics suggest the absence of any economicadvantage to securitization methodologies that feature asset poolingprior to securitization, for essentially the same reason as in the caseof general obligation bonds of the lessees.

A different securitization methodology is required in the case of otherleases, e.g., leases that are too small to justify the cost ofindividual securitization, leases to entities that don't make periodicfinancial information disclosures or entities with low credit ratings,and leases that are not bondable net. Some of these can be securitizedby pooling, whereas others may require more complicated methodologies ormay not be securitizable at all. These examples illustrate the basiceconomics of fixed-income securitization and how it relates to thecomplexity of securitization solutions. The key economic point in thisregard is that most fixed-income investment risk is systematic.Securitization methodologies involving asset pooling or tranching arepotentially viable in such situations, because new assets withinvestment risk that is mostly systematic are more likely to havesimilar investment characteristics to securities that already exist thannew assets with investment risk that is mostly idiosyncratic. Suchassets are more likely to develop an investor clientele to support assetliquidity than assets with more general investment characteristics.

Tangible Asset Securitization

Durable tangible assets that can be stored at marginal cost can besecuritized by conveying ownership to a legal holding entity chargedwith conserving the assets and issuing tradable depository certificatesevidencing beneficial ownership rights to the asset and redemption bythe certificate holder upon demand. The marketability feature ofsecuritization imposes the additional requirement of an essentiallyliquid market for the certificates, which suggests that thissecuritization methodology is applicable primarily in the case offungible assets.

This simple securitization methodology constituted the basis for varioushard currency systems of the past that based the value of currency ondurable commodities, e.g., countries that were on the ‘gold standard’ orthe ‘silver standard.’ In particular, the U.S. was once on bothstandards and issued certificates of ownership and redemption for bothmetals: gold certificates representing the right to withdraw gold coinsor bullion on deposit at the U.S. Treasury, and silver certificatesrepresenting the right to withdraw silver coins or bullion.

More generally, the quasi securitization of tangible assets has been afixture of the financial industry since the end of the U.S. Civil War(for purposes of some embodiments herein, the definition of quasi in theabridged sixth edition of Black's Law Dictionary is appropriate)(indeed, if terminology not defined herein is unclear from its context,please refer to Black's Law Dictionary (abridged sixth edition)).Historically, the quasi-securitized assets were consumable andrecyclable commodities, and quasi securitization was achieved throughthe private establishment of organized commodity exchanges. Theexchanges create liquidity in the quasi-securitized assets by providing,supporting and promoting a central marketplace for trading the quasisecurities. The exchanges reduce investor uncertainty concerning theidiosyncratic physical characteristics of securitized commodities toimmaterial levels by standardizing the classification of each commodityinto fungible subtypes with homogeneous investment characteristics formarket valuation purposes and by imposing (and enforcing) minimumquality and uniformity standards on the quasi-securitized commodities.

Transaction and financing costs are minimized for most investors andperishability constraints circumvented by designing the quasi securitiesas options and futures contracts on specified quantities and fungiblesubtypes of each commodity. For example, storage and transportationcosts are avoided by investors who close out their investment positionsrather than take delivery of the commodities, and the investors who donot avoid the costs would incur them regardless of whether thecommodities are quasi-securitized.

This process for bringing liquidity to commodities such as fungibleagricultural products is characterized as quasi securitization becausethe tradable contracts generated by the process are not securities.However, each contract could be transformed into one or more marketablesecurities by creating a Special Purpose Entity (SPE) to hold thecontract.

Commodity investors would then be able to trade securitized equityinterests in the resulting SPEs instead of the actual contracts. Thiswould comprise the actual securitization of agricultural commoditiesrather than the quasi securitization of the commodities that currentlytakes place on commodity exchanges, which would generate additionalprotection for participants in U.S. commodities markets due to theapplicability of federal securities laws and regulations. However, theimplementation of actual securitization would impose incrementaloverhead costs on market participants in terms of actual monetaryoutlays for securitization and shortened trading lives of what arealready relatively short-lived assets due to the time required forsecuritization, and it is not apparent that the relative advantages ofactual securitization are sufficient to justify the incremental costs atthis time.

Consumable and recyclable tangible assets that are not fungible have notbeen securitized, and securitization may not be feasible in such cases.However, in the case of leased tangible assets, securitizationmethodologies that do not necessarily involve asset pooling exist thatare frequently viable.

The investment characteristics of leased assets are a combination offixed-income and unencumbered asset investment characteristics.Accordingly, the investment characteristics of leased assets differmaterially when the leases differ materially, even if the assets arefungible when unencumbered by leases. Thus leased assets are notfungible.

However, in many cases the investment characteristics of leased assetscan be simplified for investment purposes by unbundling the ownershiprights to split the asset into two separately owned pieces: for example,into a fixed-income asset component and an unencumbered tangible assetcomponent, or, more generally, into a fixed-income asset component and anon-fixed-income asset component. This process is analogous totranching, in that it produces two investment assets with simplerinvestment characteristics than the original leased asset. After theleased asset is unbundled, the securitization of the components becomestwo separate problems with potentially unrelated securitizationsolutions.

For example, the ownership of a reusable tangible personal asset, e.g.,an asset that is durable, can be separated into a term of years interestand a remainder interest. In an embodiment, the asset is leased and theremaining portion of the lease term consists essentially of (or consistsof—depending on the embodiment) the term of the term of years interest.Accordingly, the term of years interest can be a fixed-income asset. Inanother embodiment, the asset is not leased but the term of yearsinterest is a fixed-income asset. In still another embodiment, the termof years interest is not a fixed-income asset.

In many legal jurisdictions, e.g., jurisdictions within the UnitedStates, the term of years interest and the remainder interest can bothbe created by deed, with each interest having a corresponding distinctdeed. Since the term of years interest and the remainder interest areassets with ownership defined by deed, each interest can be securitized,either together or separately, possibly even independently. For example,this can be accomplished with a separate SPE for each interest or with asingle SPE for both interests. In the case of separate SPEs for the twointerests, each SPE is responsible for conserving the deeded interest towhich it has legal title. In the case of a single SPE, the SPE isresponsible for conserving both deeded interests. In addition, the termof years interest is a fixed-income asset.

In one embodiment, the ownership interest represented by the deed forthe term of years interest is vested. In another embodiment, theownership interest represented by each deed is vested. In still anotherembodiment, each deed is recorded, for example, with an appropriatelegal authority. For example, in the case of the United States, anexample of an appropriate legal authority is the Secretary of State forthe state, commonwealth, territory, federal district, or other regionthat has jurisdiction over ownership of the respective interest inproperty. Examples of such United States commonwealth, territorial,federal district, or other regional jurisdictions include theCommonwealth of Puerto Rico; Washington, D.C.; the Territory of theVirgin Islands; and the Territory of Guam. In the case of aircraft,another example of an appropriate legal authority in the United Statesis the Federal Aviation Agency. In the case of railroad equipment, e.g.,railroad cars, another example of an appropriate legal authority is theInterstate Commerce Commission.

In an embodiment, the ownership interest represented by each deed isvested and each deed is recorded with an appropriate legal authority.This embodiment ensures that the maximum legal protection is accorded toequity investors in each securitized interest by property law, which isreasonably expected to contribute positively to the marketability ormarket valuation of the securitized asset. Examples of legaljurisdictions within the United States in which term of years andremainder interests in personal property can be created by deed and canbe vested interests are the State of Virginia, the State of NorthCarolina, the State of Georgia, and the State of Nebraska.

In one embodiment, the deed for the term of years interest and the deedfor the remainder interest deed are recorded with the same legalauthority. In another embodiment, the deed for the term of yearsinterest and deed for the remainder interest are recorded with differentlegal authorities. For example, in the United States, the differentlegal authorities could be the Secretary of State for different regionaljurisdictions, e.g., different states. In still another embodiment, thedeed for the term of years interest and the deed for the remainderinterest are recorded in different countries.

The reusable tangible personal assets that can be securitized in thisway include, for example, aircraft, ships, barges, houseboats,automobiles, trucks, movable oil drilling platforms and oil wellplatforms, railroad cars, paintings, sculptures, other works of art,gemstones, precious metal, and other precious objects such as jewelry.Furthermore, equity interests in tangible assets can be pooled prior tosecuritization. For example, deeded term of years interests can bepooled before securitization and the resulting pool securitized. If eachterm of years interest is a fixed-income asset, then the pool is also afixed-income asset. Similarly, deeded remainder interests can be pooledbefore securitization and the resulting pool securitized. Each pool canbe comprised of interests in different tangible assets.

Reusable tangible personal property can also be separated into anaugmented term of years interest and a complementary remainder interest,in which the augmented term of years interest and the complementaryremainder interest are both deeded interests. There may be either onedeed for the augmented term of years interest or separate deeds for thecomponents that comprise the augmented term of years interest, forexample, a deed for a vested term of years component of the augmentedterm of years interest and a separate deed for a secondary contingentremainder interest component of the augmented term of years interest.

In one embodiment, the property is leased for a term, the remainingportion of which consists essentially of (or consists of—depending onthe embodiment) the term of the unconditional component of the augmentedterm of years interest. In this case, the augmented term of years is afixed-income asset with greater recourse in the event of lease defaultthan the recourse usually available in the case of a corresponding termof years interest.

In an embodiment, the deed for the component of the augmented term ofyears interest that includes an unconditional term of years interest isvested and recorded with an appropriate legal authority, any other deedsfor components of the augmented term of years interest are alsorecorded, and the at least one deed for the complementary remainderinterest is also recorded. In this case, for purposes herein, theaugmented term of years interest is referred to as a deeded and vestedinterest, whether or not there is a deed for a contingent component ofthe augmented term of years that is not vested.

State and territorial property law varies much more with regard to therights defined by qualified fee interests in personal assets than itdoes in the case of qualified fee interests in real assets. Sincepersonal assets are not fixed in location, this poses a potentialproblem: an owner of a qualified fee interest in a personal asset couldunder some circumstances improve the property rights defined by thequalified fee interest at the expense of other interest holders in theasset by selling the interest to a buyer in a different regional legaljurisdiction.

Several types of covenants can be inserted into a deed to an interest ina personal asset to prevent this situation from occurring in case theinterest is a qualified fee interest. For example, the deed can includean express covenant specifying the legal jurisdiction that defines theproperty rights in the deed. Another possibility is an express covenantrestricting each transferee of the interest, e.g., with a restriction onthe domicile of each transferee. Still another possibility is an expresscovenant restricting each recording of the deed, e.g., to one specificlegal jurisdiction or to any from an express list of legaljurisdictions. Any combination of these covenants can be inserted intothe deed as deemed appropriate by interested parties when the feeinterest is created.

Property Rights Securitization

A property right in an asset can be defined as the property rightassociated with an appropriately deeded fee interest in the asset.Accordingly, a property right in an asset can be securitized bysecuritizing a deed to the property right. More generally, at least oneproperty right in an asset can be securitized by securitizing a deed tothe at least one property right. Still more generally, at least oneproperty right in an asset can be the at least one property rightassociated with more than deeded fee interest in the asset. In suchcases, the at least one property right can be securitized bysecuritizing the pooled deeds.

This securitization methodology can be applied to property rightsassociated with tangible assets, property rights associated withintangible assets, and property rights associated with real assets.Examples of property rights in real assets, e.g., property rightsassociated with real estate, that can be securitized in this way includethe following: mineral rights, water rights, timber rights, and airrights. In one embodiment, at least one deeded fee interest does notinclude a fee interest in surface land.

Mobile air rights can be securitized in this way if they are not alreadysecuritized. Alternatively, mobile air rights can be issued in fungibleunits, e.g., as certificates of ownership of a standardized volume ofmobile air rights with standardized regulatory exemption rights.

In the case of fungible certificates that are limited liabilitytransferable assets, the certificates can be assembled to compriselarger volumes of mobile air space. This implies that such certificatesare marketable, which implies that the certificates are securities. Inshort, mobile air rights can be issued as securities.

Securitization of Firms

As defined in Black's law dictionary, a firm is a business entity orenterprise. This is distinct from an asset and also from a pool ofassets for purposes herein and for financial and investment purposes ingeneral, although firms usually do own assets. The distinction reflectsdifferences in financial and investment characteristics of firms andassets. One key difference is that firms have dynamic investmentpolicies that can change over time, for example, in response to evolvingmarket conditions, whereas assets and pooled assets do not. For example,firms can decide to raise capital. Firms can also decide to change theinvestment characteristics of the firm, e.g., by selling assets andreinvesting some or all of the proceeds through acquisition of otherassets. By contrast, assets and pools of assets do not have investmentpolicies and cannot decide to raise capital, redeploy capital orotherwise change the investment characteristics of the firm. Thus a firmis not an asset or pool of assets, and a securitized firm is not asecuritized asset or a securitized asset pool. In general, thisdistinction is acknowledged in financial market terminology, in whichloans secured by legal recourse to specific assets are labeledasset-based or asset-backed financings, whereas loans not secured bylegal recourse to specific assets, e.g., most securitized loans to largefirms, are labeled credit-based financings.

The securitization of equity investment interests in firms has been amainstay of the financial industry for at least 160 years. In contrastto fixed-income assets, which have investment risk that is primarilysystematic, about half of the variance in returns from securitizedcorporate equity is idiosyncratic. Thus pooled equity in firms is anasset with significantly different investment characteristics thanindividual assets in the pool.

This does not imply anything conclusive concerning the impact of poolingon the aggregate value of unsecuritized firms. However, it does raisethe question of whether pooling such assets maintains aggregate assetvalue on a consistent basis.

If the answer to this question is “no,” then the securitizationproposition implies that securitization methodologies that involvepooling are less likely to enhance the asset value of firms than thesecuritization of individual firms. This suggests that many moresecuritizations of individual firms should take place thansecuritizations of pooled firms, and many more securitizations offocused firms than securitizations of fledgling conglomerates. This isconsistent with descriptions of IPOs in the equity markets over manydecades, with the notable exception of conglomerates in the 1950s-1960s.

Conglomerates are securitized firms that aggregate diverse unsecuritizedfirms under one securitized umbrella firm. They were successful publicofferings in the mid-twentieth century because of the popular managementidea at the time that exceptional management skills are largelyindependent of specific industry expertise. Accordingly, investorsviewed exceptional corporate governance as easily portable acrossenterprises with relatively uncorrelated investment risk.

Conglomerates ceased to be created as the popularity of the managementidea faded and the cost of equity capital rose for existingconglomerates. Eventually the conglomerate corporate structure becameperceived as a value depressant, and most conglomerates weredisaggregated into more focused securitized firms.

The lessons from conglomerates may be applicable to REITs. REITs aresecuritized firms that receive more favorable treatment from the taxcode than most firms in return for compliance with constraints on theiroperating activities and ownership. For example, REITs must derive atleast 75% of their ordinary operating income from investments in realestate-related assets in most years and distribute at least 90% of theordinary income to shareholders. A REIT that has most of its real estatecapital invested in commercial real estate equity is known as an equityREIT.

Although many investors perceive equity REITs to be securitizedcommercial real estate, real estate investment characteristics suggestotherwise. For example, the average proportion of idiosyncraticinvestment risk in commercial real estate has been even higherhistorically than the average proportion of idiosyncratic risk instocks. Unless unidentified real estate investment characteristicscompensate for the failure of pooling in general to enhance the value ofunsecuritized assets with highly idiosyncratic investment risk, it isunlikely that equity REITs enhance asset value through securitization.Accordingly, there must be another explanation for the recent success ofequity REITs at raising capital.

The constraints on REITs are intended to make the firms into real estateanalogues of stock and bond investment companies, which also are treatedfavorably by the tax code. However, stock and bond investment companiesinvest passively in assets that are already securitized.

Three investment characteristics suggest that equity REITs resembleconglomerates more closely than they resemble investment companies:investments in unsecuritized assets, the high proportion ofidiosyncratic risk in the unsecuritized assets, and the inclusion ofreal estate management services and development activity amongpermissible business activities.

These considerations suggest three hypotheses for the recent success ofREITs in the capital markets: REITs recently have acquired somesystematic business advantage not available to conglomerates, commercialreal estate investment characteristics have changed recently to reducethe proportion of real estate investment risk that is idiosyncratic, orREITs are an impermanent phenomenon that will fade in time likeconglomerates. Regardless of what explanation is correct, any advantagethat REITs have in accessing the capital markets must have appearedrelatively recently, because REITs have been around since 1960 but werenot noticeably successful at raising investment capital until 1991.

The magnitude of the benefit that firms receive from securitization isdifficult to measure and varies across firms. However, events in theaftermath of the Enron and Worldcom collapses provide an indication inthis regard. Securitization costs continue to accrue after the firm issecuritized due to the ongoing cost involved in complying withregulatory information disclosure requirements. The ongoing cost ofcompliance increased following the Enron and Worldcom collapses as theSarbanes-Oxley bill raised the disclosure requirements to forestall anyrecurrence of these unanticipated events.

The diseconomies of small scale inherent in securitization costs arepresent in the ongoing cost of compliance with disclosure requirements,which implies that the increased burden of compliance disproportionatelyimpacts small firms. In response to the incremental disclosurerequirements, a number of small publicly traded firms with healthybalance sheets and income statements delisted their stocks to eliminatethe ongoing cost of compliance. This implies that the economicsgoverning the securitization of small firms has been materially altered.

Intangible Asset Securitization

Many forms of intangible assets besides intangible fixed-income assetsare property that can be securitized, including intellectual property.The property can be reusable and durable, for example, in many cases,patents, trademarks and copyrights. Such assets are candidates forsecuritization. Accordingly, each such property can be separated into aterm of years interest and a remainder interest.

In many legal jurisdictions, e.g., jurisdictions within the UnitedStates, the term of years interest and the remainder interest can bothbe created by deed, with each interest having a corresponding distinctdeed. Since the term of years interest and the remainder interest areassets with ownership defined by deed, each interest can be securitized,either together or separately, possibly even independently. For example,this can be accomplished with a separate SPE for each interest or with asingle SPE for both interests. In the case of separate SPEs for the twointerests, each SPE is responsible for conserving the deeded interest towhich it has legal title. In the case of a single SPE, the SPE isresponsible for conserving both deeded interests.

If the term of years interest is leased, and the remaining portion ofthe lease term essentially includes the term of the term of yearsinterest, then the term of years interest is a fixed-income asset.Embodiments can involve either leased or unleased term of yearsinterests or both.

In one embodiment, the ownership interest represented by the deed forthe term of years interest is vested. In another embodiment, theownership interest represented by each deed is vested. In still anotherembodiment, each deed is recorded, for example, with an appropriatelegal authority. For example, in the case of the United States, anexample of an appropriate legal authority is the Secretary of State forthe state, territorial, federal district, or other region that hasjurisdiction over ownership of the respective interest in property.Examples of territorial, federal district, or other regionaljurisdictions include the Commonwealth of Puerto Rico; the District ofColumbia, the Territory of the Virgin Islands, and the Territory ofGuam.

In an embodiment, the ownership interest represented by each deed isvested and each deed is recorded with an appropriate legal authority.This embodiment ensures that the maximum legal protection is accorded toequity investors in each securitized interest by property law, which isreasonably expected to contribute positively to the marketability ormarket valuation of the securitized asset. Examples of legaljurisdictions within the United States in which term of years andremainder interests in personal property can be created by deed and canbe vested interests are the State of Virginia, the State of NorthCarolina, the State of Georgia, and the State of Nebraska.

In one embodiment, the deed for the term of years interest and the deedfor the remainder interest deed are recorded with the same legalauthority. In another embodiment, the deed for the term of yearsinterest and deed for the remainder interest are recorded with differentlegal authorities. For example, in the United States, the differentlegal authorities could be the Secretary of State for different regionaljurisdictions, e.g., different states. In still another embodiment, thedeed for the term of years interest and the deed for the remainderinterest are recorded in different countries.

Equity interests in intangible assets can be pooled prior tosecuritization. For example, deeded term of years interests can bepooled before securitization and the resulting pool securitized. If eachterm of years interest is a fixed-income asset, then the pool is also afixed-income asset. Similarly, deeded remainder interests can be pooledbefore securitization and the resulting pool securitized. Each pool canbe comprised of interests in different tangible assets.

Reusable intangible personal property can also be separated into anaugmented term of years interest and a complementary remainder interest,in which the augmented term of years interest and the complementaryremainder interest are deeded interests. There may be one deed for theaugmented term of years interest or separate deeds for components thatcomprise the augmented term of years interest, for example, a deed for avested term of years component of the augmented term of years interestand a separate deed for a secondary contingent remainder interestcomponent of the augmented term of years interest.

In one embodiment, the property is leased and the remaining portion ofthe lease term is essentially at least as long as the term of theunconditional component of the augmented term of years interest. In thiscase, the augmented term of years is a fixed-income asset with morerecourse in event of lease default than the recourse available to acorresponding term of years interest.

In an embodiment, the deed for the at least one component of theaugmented term of years interest that includes an unconditional term ofyears interest is vested and recorded with an appropriate legalauthority, any other deeds for components of the augmented term of yearsinterest are also recorded, and the at least one deed for thecomplementary remainder is also recorded. In this case, for purposes ofsome embodiments herein, the augmented term of years interest isreferred to as a deeded and vested interest, whether or not there is adeed for a contingent component of the augmented term of years that isnot vested.

Intellectual property can be licensed as well as leased. Ownership ofall or part of the future revenues generated by a license can besecuritized, for example, either as a deeded interest or otherassignment of the ownership rights to the SPE created as part of thesecuritization process to conserve or hold the asset. In anotherembodiment, the deeded interest or other assignment of the ownershiprights is recorded with an appropriate legal authority. The asset can besecuritized either as an interest in an individual license or as part ofa pool of interests in such licenses.

Implications

Securitization is the process of selectively transforming assets byconverting ownership interests into marketable securities with the sameinvestment characteristics as the original asset other than liquidityand limited liability. The transformation enhances asset value beforesecuritization cost is considered by raising the demand curve for theasset without impacting the supply curve.

Processes that include changing investment characteristics other thanliquidity and owner liability can be regarded as a two-stage assettransformation methodology: alteration of the asset to change the otherinvestment characteristics followed by securitization of the alteredasset. The impact of two-stage methodologies on asset value canfrequently be determined by separately examining the successive impactof each stage on asset value.

Assets with approximately homogeneous investment characteristics can bepooled to generate an asset with essentially the same investmentcharacteristics as the component assets. This applies to assets withapproximately homogeneous systematic risk and a low proportion ofidiosyncratic risk such as residential mortgages and to fungible classesof commodities.

The impact of the two-stage methodology is easily described in thiscase, since the first stage is immaterial to investment characteristicsother than liquidity. It follows that the effects of asset pooling areimproved liquidity for shares (e.g., fungible ownership interests) inthe new asset and economies of scale that reduce the impact ofsecuritization costs. Since the securitization stage enhances value, thetwo-stage methodology enhances asset value in this case. In the case ofresidential finance, the methodology is estimated to have reduced thecost of mortgages for homeowners by as much as two hundred basis points.

The impact on asset value of methodologies that involve pooling becomesless certain as the investment characteristics of individual assets inthe pool become more heterogeneous. Some additional uncertainty existsin the case of pooled assets with heterogeneous exposure to the samesystematic investment risk factors but with uniformly high systematicrisk. This applies to pooled commercial real estate mortgages, pooledcommercial leases, and pooled corporate debt such as receivables.

The market for securitized fixed-income assets has grown strongly overthe last fifteen years. Nonetheless, many such assets are notsecuritized, and many originators of fixed-income assets resiststandardizations that would simplify asset securitization, apparentlybecause the prospective savings do not justify the compromise ofidiosyncratic business objectives.

The prospects for creating incremental value through securitizationmethodologies that involve pooling become progressively less certain asthe average proportion of systematic investment risk across the pooledassets is reduced. For example, pooling of assets prior tosecuritization is rarely observed in cases in which at least half of theinvestment risk of individual pooled assets is idiosyncratic. Thisapplies in general to the securitization of firms.

The securitization of a reusable tangible asset by separating the assetinto either a term of years component and a remainder component or intoan augmented term of years component and a complementary remaindercomponent and then separately securitizing each component is a specialcase of a more general asset securitization methodology. In general, anasset can be securitized by separating the asset into two or morecomponents and separately securitizing each said component. If onecomponent is securitized and another component is not securitized, thenthis is a securitization methodology for the one component. Bothillustrations are examples of a securitization methodology for an assetcomponent.

Most commercial real estate investment risk is idiosyncratic.Accordingly, equity REITs comprise a recent anomaly to the observedpattern for securitization.

Recent advances in securitization technology focus on assets with a highproportion of systematic investment risk. This is consistent withslightly earlier advances in investment theory collectively known asMPT, which view investment risk as separable into systematic andidiosyncratic components and regard systematic risk factors as moresignificant for purposes of asset pricing. Fixed-income securitizationmethodologies based on pooling can be regarded from this perspective asan application of MPT to finance.

Computer System

As used herein, the term “computer” generally refers to hardware orhardware in combination with one or more program(s), such as can beimplemented in software. Computer aspects can be implemented on generalpurpose computers or specialized devices, and can operate electrically,optically, or in any other fashion. A computer as used herein can beviewed as at least one computer having all functionality or as multiplecomputers with functionality separated to collectively cooperate tobring about the functionality, and in some embodiments (depending oncontext herein) computer systems can overlap. For example, butSecurities Generation System 20 can be one computer system (FIG. 2)while the Securities Distribution System 34 comprises a multicomputersystem. Logic flow can represent signal processing, such as digital dataprocessing, communication, or as evident from the context hereinafter.Logic flow or “logic means” can be implemented in discrete circuits,programmed computer, or the equivalent. Computer-readable media, as usedherein can comprise at least one of a RAM, a ROM, A disk, an ASIC, and aPROM. Industrial or technical applicability is clear from thedescription, and is also indicated below.

Illustratively, an embodiment can include a Securities GenerationComputer System 20 for manipulating signals to produce an illustrationof the conversion of one or more illiquid interests in property intosecurities. FIG. 1 shows one embodiment of the apparatus of SecuritiesGeneration Computer System 20. The embodiment is comprised of a computercontrolled by a Processor 2, at least one Input Device 4 connected toreceive Input Data 6, at least one Output Device 8 connected to generateoutput, and a Memory System 10, for example, a hard drive for thecomputer or located remotely, for example, in another computer connectedto the computer. A Logic Means 12 controls the processor to implementthe securitization process. In one embodiment, Logic Means 12 is acomputer program stored in Memory System 10. In said embodiment, MemorySystem 10 also stores a Word Processing Program 14 and at least one WordProcessing Document 16. In FIG. 1, Input Device 4 refers collectively tothe connected input devices and Output Device 6 refers collectively tothe connected output devices.

Computer Network

Input Device 4 is connected to receive input signals to ComputerSecurities Generation System 20 from other computers in a multicomputersecuritization system. Output Device 8 is connected to communicateoutput signals to other computers in the multicomputer securitizationsystem. The multicomputer securitization is comprised of a computernetwork.

FIG. 2 shows an embodiment of the computer network of the securitizationsystem. Each computer system in the computer network has a processor, aninput device connected to receive input signals from at least one othercomputer in the network, an output device connected to communicateoutput to at least one other computer in the network, and a memorysystem, which may be located remotely from the respective computersystem processor.

In one embodiment, with reference to FIG. 2, the securitization systemis comprised of Securities Generation Computer System 20, InsuranceComputer System 22, Tax Attorney Computer System 24, Tax AnalystComputer System 26, Rating Agency Computer System 28, Regulatory AgencyComputer System 29, Disclosure Computer System 30, Offering DocumentComputer System 32, and Securities Distribution System 34.

In each implementation of the securitization process, SecuritiesGeneration Computer System 20 converts ownership interests in illiquidassets into marketable securities that represent interests in at leastone entity.

Insurance Computer System 22 has hardware and logic means analogous toSecurities Generation Computer System 20, except that Computer System 22is programmed to receive input signals from Computer System 20,manipulate the input to generate documentation for financial riskreduction insurance, e.g., credit-wrap insurance, for securitiesgenerated by Computer System 20, compute at least one insurance premiumfor the insurance, generate output including the insurance premium or atleast some of the documentation, and communicate at least some of theoutput including at least some of the input over the securitizationsystem computer network. In one embodiment, Computer System 22communicates the at least some of the output to Computer System 20.

For example, in the case of one or more reusable tangible personalassets that are securitized by separating the assets into deeded term ofyears and remainder interests or augmented term of years andcomplementary remainder interests, forms of financial risk insurancethat can be generated by Computer System 22 include: case law changes inproperty law that adversely affect the investment characteristics orvalue of one or more types of shares in the securitized asset;legislative changes in property law that adversely affect the investmentcharacteristics or value of one or more types of shares in thesecuritized asset; legislative changes in tax law, e.g., in the case ofthe United States, federal law or state law, that adversely affect theinvestment characteristics or value of shares in the securitized assetthrough changes in cost recovery tax deductions, or in anotherembodiment through changes in property tax rates. Alternatively, in thecase of a fixed-income interest in an entity, Computer System 22 cangenerate credit wrap insurance to protect investors in one or more typesof shares in the entity against default risk. Still alternatively, or inaddition, in the same case, Computer System 22 can generate yieldmaintenance insurance to protect against prepayment risk.

In one embodiment Computer System 22 is programmed to compute insurancepremiums. In another embodiment, Computer System 22 is programmed togenerate insurance policy documentation, e.g., one or more insurancepolicies. In still another embodiment, Computer System 22 is programmedto compute insurance premiums and documentation including one or moreinsurance policies.

Tax Attorney Computer System 24 has hardware and logic means analogousto Securities Generation Computer System 20, except that Computer System24 is programmed to receive input from Computer System 20, generatedocumentation including a tax opinion for the securities generated byComputer System 20, generate output including at least some of thedocumentation and at least some of the input, and communicate at leastsome of the output including at least some of the input over thecomputer network, including the tax opinion. In one embodiment, ComputerSystem 24 communicates the at least some of the output to ComputerSystem 20.

Tax Analyst Computer System 26 has hardware and logic means analogous toSecurities Generation Computer System 20 except for input. In a firstembodiment, Computer System 26 is programmed to receive input fromComputer System 20. In a second embodiment, Computer System 26 isprogrammed to receive input from Computer System 22. Computer System 26manipulates the input using a stored financial model to compute acomponent of financial risk based on tax law risk for securitiesgenerated by Computer System 20, generates output including thecomponent of financial risk, and communicates at least some of theoutput, including the component of financial risk, over the network. Inthe first embodiment, Computer System 26 communicates the at least someof the output to Computer System 20. In the second embodiment, ComputerSystem 26 communicates the at least some of the output to ComputerSystem 22.

In another embodiment, Computer System 26 manipulates the input using astored financial model to compute a schedule of one or more tax paymentsfor at least one type of security generated by Computer System 20, e.g.,a schedule of income tax payments on scheduled cash flows in the case ofa type of fixed-income security generated by Computer System 20, using astored financial model, generates output including the schedule ofincome tax payments, and communicates at least some of the output,including said schedule of one or more tax payments, over the network.For example, in the United States, in the case of reusable property thatis securitized by separating the ownership of the property into either adeeded term of years interest and a deeded remainder interest or adeeded augmented term of years interest and a deeded complementaryremainder interest, with an entity for the deeded term of years oraugmented term of years interest and a separate entity for thecorresponding remainder or complementary remainder interest, thepurchase price of shares in the term of years or augmented term of yearsinterest is usually amortized over the term of the term of years oraugmented term of years interest, with taxes on income received byinvestors from shares in the term of years or augmented term of yearsinterest reduced accordingly by the amortization tax deductions. Thecorresponding remainder or complementary remainder interest receives notaxable income for income tax purposes during the term of the term ofyears or augmented term of years interest, and accordingly incurs noincome tax during this period.

Rating Agency Computer System 28 has hardware and logic means analogousto Securities Generation Computer System 20. In one embodiment, ComputerSystem 28 is programmed to receive input from Computer System 20. Inanother embodiment, Computer System 28 is programmed to receive inputfrom Disclosure Computer System 30.

Computer System 28 is programmed to manipulate the input using a storedmodel to generate a credit rating for at least one type of fixed-incomesecurity generated by Computer System 20, generate output including eachsaid credit rating and at least some of the input, and communicate atleast some Of the output, including each said credit rating and at leastsome of the input, over the network. In one embodiment, Computer System28 communicates the output to Computer System 20.

Regulatory Agency Computer System 29 has hardware and logic meansanalogous to Securities Generation Computer System 20 except thatComputer System 29 is programmed to receive input from Computer System20, including an application to register securities generated byComputer System 20 for distribution purposes, manipulate the input tosupport determination of whether to approve the registrationapplication, generate documentation including notification of the resultof the determination, generate output including at least some of thedocumentation, and communicate the documentation over the network, e.g.,to Computer System 20.

Disclosure Computer System 30 has hardware and logic means analogous toSecurities Generation Computer System 20 except that Computer System 30is programmed to receive input from Computer System 20, manipulate theinput using stored financial documentation to generate disclosuredocumentation, e.g., a disclosure document, for at least one type ofsecurity generated by Computer System 20, generate output including eachsaid disclosure document, and communicate at least some of the output,including each said disclosure document, over the network. In oneembodiment, Computer System 30 communicates the at least some of theoutput to Computer System 20. In another embodiment, Computer System 30communicates the at least some of the output to Computer System 28.

Offering Document Computer System 32 has hardware and logic meansanalogous to Securities Generation Computer System 20 except thatComputer System 32 is programmed to receive input from Computer System20, manipulate the input using stored financial documentation togenerate an offering document for each type of security generated byComputer System 20 to be distributed, generate output including eachsaid offering document, and communicate at least some of the outputincluding each said offering document over the network. In oneembodiment, Computer System 32 communicates the at least some of theoutput to Computer System 20. In another embodiment, Computer System 32communicates the at least some of the output to Securities DistributionSystem 34. Each offering document can be a term sheet, an offeringmemorandum, a prospectus, or other offering document as selected byComputer System 32.

With reference to FIG. 3, in one embodiment, Securities DistributionSystem 34 is comprised of a multicomputer network included in thecomputer network of the securitization system. In one embodiment,Securities Distribution System 34 includes Securities TransactionComputer System 36, Securities Pricing Computer System 38, SellerComputer System 40, and Bidder Computer System 42. For purposes of someembodiments herein, bidder is defined as one who makes an offer to buy.

Securities Transaction Computer System 36 has hardware and logic meansanalogous to Securities Generation Computer System 20 except thatComputer System 36 is programmed to conduct a sale of the securities tobe distributed and to receive input over the network includingdisclosure documentation for each type of security to be distributed.Computer System 36 manipulates the input to determine the format of thesale using stored documentation, generate offering documentation for thesecurities to be distributed, communicate the offering documentation anddisclosure documentation to Bidder Computer System 42, determine whichbid or bids are successful, generate sale documentation notifying eachsuccessful bidder of the items purchased and the amount of the purchaseusing stored documentation, and communicate the sale documentation overthe network. If the format of the sale is an auction, then the offeringdocumentation includes a bidder form in which the prices are to befilled in by Bidder Computer System 42. If the format of the auctionincludes reserve prices for the securities, then Computer System 36receives the reserve prices from Securities Pricing Computer System 38.If the format of the sale involves specified seller prices or targetprices in a bid-or-buy format, then Computer System 36 receives thespecified prices or target prices from Securities Pricing ComputerSystem 38. If the format of the sale is an auction or bid-or-buy processthat requires seller approval after the close of the auction toconsummate the transaction, then Computer System 36 generatesnotification documentation to notify Seller Computer System 40 of theprices or amounts that require seller approval using storeddocumentation, generates output including at least part of thenotification documentation, and communicates at least part of the outputover the network. In this case, Computer System 36 receives second inputfrom Seller Computer System 40 and manipulates the second input todetermine whether to consummate or reject all or part of thetransaction. In one embodiment, the decision is limited to consummationor rejection of the entire transaction.

In one embodiment, Securities Transaction Computer System 36 can be partof an organized financial exchange, e.g., the New York Stock Exchange.In another embodiment, System 36 can be a system belonging to a businessthat sells securities to a limited clientele of investors. In stillanother embodiment, System 36 can be a computer system of a organizedprivate exchange that is available to only a limited clientele offinancial organizations. In yet another embodiment, System 36 can be acomputer system of the seller, in which case System 36 and System 40could either be the same computer system or different systems, dependingon the securities distribution system architecture. Securities PricingComputer System 38 has hardware and logic means analogous to SecuritiesGeneration Computer System 20 except that Computer System 38 isprogrammed to receive input from Computer System 20, manipulate theinput using at least one stored model to compute a valuation for eachtype of security generated by Computer System 20 to be distributed,generate output including each said valuation and at least some of theinput, and communicate at least some of the output, including each saidvaluation and at least some of the input, over the computer network.

In one embodiment, in the case of each type of security that representsa fixed-income interest in an entity, a market-based yield to maturityis computed based on a yield curve for minimal-risk securities, e.g.,U.S. Treasury security interest rates, and at least one risk factorincluding credit risk for the type of security and, in some cases,prepayment risk for the type of security, e.g., based on a prepaymentrisk computation by Computer System 38 that manipulates the input datausing a stored prepayment risk model. The valuation is computed as thepresent value of the cash flow schedule for the type of securitydiscounted at the market-based yield to maturity. In another embodiment,an after-tax market-based yield to maturity is computed based on thepre-tax market-based yield to maturity and a selected tax rate. In thiscase, the valuation is computed as the present value of the after-taxcash flow schedule for the type of security discounted at the after-taxmarket-based yield to maturity.

Seller Computer System 40 has hardware and logic means analogous toSecurities Generation Computer System 20 except that Computer System 40is programmed to receive input notifying the seller at the conclusion ofthe transaction of the number of securities of each type that are thesubject of successful bids, the total amount of the successful bids foreach type of security, and the combined total amount of the successfulbids. If any part of the transaction requires seller approval toconsummate, then Computer System 40 receives second input, manipulatesthe second input to generate determining documentation instructingComputer System 36 on whether or not to close transactions involvingsuccessful bids for each type of security, generates output including atleast part of the determining documentation, and communicates at leastpart of the output over the network. In one embodiment, the decision islimited to consummation or rejection of the entire transaction. There isusually only one seller computer system, although in some cases theremay be more than one.

Bidder Computer System 42 has hardware and logic means analogous toSecurities Generation Computer System 20 except that Computer System 40is programmed to receive input from Securities Transaction ComputerSystem 36 including software to generate bid documentation including abid, communicate the bid to Computer System 36 over the network, receiveconfirmation of the bid from Computer System 36, receive notification ifany part of the bid is successful and a sale is consummated, and receivean invoice for the sale. If the transaction is conducted in auctionformat, then there is more than one bidder computer system. In cases ofpre-specified transaction prices, there may be either one or more thanone buyer computer systems.

Process Description

In one embodiment, with reference to FIG. 4, Input Device 4 receivesinput data in Receive Input 50 including data representing an assetcomprised of one or more illiquid interests in property and manipulatesthe input data to generate input signals. In Determine Entity 52, LogicMeans 12 manipulates the input signals to determine whether or not togenerate an entity for the securitized asset. In one embodiment, theinput data is received from a single input device. In anotherembodiment, input data from more than one connected input device is usedby Logic Means 12 to make the determination. If the asset is acorporation, the answer is usually “no.” In many other cases, the answeris usually “yes.” If the answer is “yes,” Logic Means 12 manipulates theinput signals in Select Number of Entities 54 to determine the number ofentities that collectively will conserve or hold the securitizableasset. In Select Type of Entity 56, Logic Means 12 manipulates the inputsignals to select at least one defining document template for at leastone new entity using data stored in Memory System 10, for example, in aword processing file, and further manipulates the input signals toidentify an appropriate holding entity for each said illiquid interestin property among the new entities.

If the answer in Determine Entity 52 is “no,” Logic Means 12 proceeds toDetermine Capital Structure 58 and manipulates the input signals todetermine whether or not to generate a capital structure for each saidholding entity. If the answer in Determine Capital Structure 58 is“yes,” Logic Means 12 manipulates the input signals in Select CapitalStructure of Entity 60 to determine the capital structure of each saidholding entity, including the number of capital classes, the types ofshares in each capital class, and the number of shares of each type. Forexample, in the case of pass-through MBS for a pool of residentialmortgages, there is usually one entity, one capital class, and one typeof share; in the case of CMOs, there is usually one entity, one capitalclass, and two or more types of shares; in the case leased tangibleproperty, there usually are two entities, one capital class for eachentity, and one type of share for each entity. In the case of shares inan entity that holds interests in debt, the shares are frequentlyreferred to as bonds, and there is a face or principal amount associatedwith each share.

In Generate Defining Document for Entity 62, Logic Means 12 manipulatesthe input signals to generate defining documentation, e.g., a definingdocument, for each said holding entity using data stored in MemorySystem 10, for example, from one or more document templates stored inMemory System 10 in the form of word processing files.

If the answer in Determine Capital Structure 58 is “no,” Logic Means 12proceeds to Generate Defining Document for Shares 64 and manipulates theinput signals to generate defining documentation for the correspondingshares.

In one embodiment, Securities Generation Computer System 20 receivesinput including either documentation for financial risk reductioninsurance for at least some of the securities generated by ComputerSystem 20 or an insurance premium for the insurance or both thedocumentation and the insurance premium.

In another embodiment, Computer System 20 receives input includingdocumentation including a tax opinion for the securities generated byComputer System 20 from Tax Attorney Compute System 24.

In still another embodiment, Computer System 20 receives input includinga quantitative measurement of a component of financial risk based on taxlaw risk for securities generated by Computer System 20 from Tax AnalystComputer System 26.

In still another embodiment, Computer System 20 receives input includingat least one credit rating for fixed-income securities generated byComputer System 20 from Rating Agency Computer System 28.

In still another embodiment, Computer System 20 receives input includingdocumentation certifying the registration of securities generated byComputer System 20 for distribution purposes from Regulatory AgencyComputer System 29.

In still another embodiment, Computer System 20 receives input includingdisclosure documentation, e.g., a disclosure document, for at least onetype of security generated by Computer System 20 from DisclosureComputer System 30.

In still another embodiment, Computer System 20 receives input includingan offering document for each type of security generated by ComputerSystem 20 to be distributed from Offering Document Computer System 32.

In other embodiments, Computer System 20 can receive input from anycombination of Computer Systems 22-34 corresponding to output of saidcomputer systems communicated over the network.

Note that as used herein, the term “computer” generally refers tohardware or hardware in combination with one or more program(s), such ascan be implemented in software. Computer aspects can be implemented ongeneral purpose computers or specialized devices, and can operateelectrically, optically, or in any other fashion. A computer as usedherein can be viewed as at least one computer having all functionalityor as multiple computers with functionality separated to collectivelycooperate to bring about the functionality. Logic flow can representsignal processing, such as digital data processing, communication, or asevident from the context hereinafter. Logic flow or “logic means” can beimplemented in discrete circuits, programmed computer, or theequivalent. Computer-readable media, as used herein can comprise atleast one of a RAM, a ROM, A disk, an ASIC, and a PROM. Industrial ortechnical applicability is clear from the description, and is alsoindicated below.

In sum, appreciation is requested for the range of possibilities flowingfrom the core teaching herein. More broadly, however, the terms andexpressions which have been employed herein are used as terms ofteaching and not of limitation, and there is no intention, in the use ofsuch terms and expressions, of excluding equivalents of the featuresshown and described, or portions thereof, it being recognized thatvarious modifications are possible within the scope of the embodimentscontemplated and suggested herein. Further, various embodiments are asdescribed and suggested herein. Although the disclosure herein has beendescribed with reference to specific embodiments, the disclosures areintended to be illustrative and are not intended to be limiting. Variousmodifications and applications may occur to those skilled in the artwithout departing from the true spirit and scope defined in the appendedclaims.

Thus, although only a few exemplary embodiments have been described indetail above, those skilled in the art will readily appreciate that manymodifications are possible in the exemplary embodiments withoutmaterially departing from the novel teachings and advantages herein.Accordingly, all such modifications are intended to be included withinthe scope defined by claims. Means-plus-function claims are intended tocover the structures described herein as performing the recited functionand not only structural equivalents, but also equivalent structures.Thus, although a nail and a screw may not be structural equivalents inthat a nail employs a cylindrical surface to secure wooden partstogether, whereas a screw employs a helical surface, in the environmentfastening wooden parts, a nail and a screw may be equivalent structures.The accompanying drawings illustrate embodiments intended to illustrateand exemplify in a teaching manner.

1. A method of using an apparatus to generate output supporting an assettransaction, comprising: receiving, at a processor of a computer system,input data associated with at least one security, wherein said at leastone security includes an interest in a securitized reusable tangiblepersonal asset, the securitized reusable tangible personal asset havingone component that is a securitized deeded term of years interest andanother component that is a securitized deeded remainder interest,wherein the interest in the securitized reusable tangible personal assetis an interest in only one member of a group of assets with two members,wherein the group of assets includes said one component and said anothercomponent, the input data comprising a bid for the at least onesecurity; controlling the processor to compute, using at least some ofthe input data, a valuation of at least some of the at least onesecurity, wherein the at least some of the at least one securityincludes at least some of the interest in the securitized reusabletangible personal asset, in consummating a sale of the at least some ofthe at least one security at a price corresponding to the valuation andto generate output including one of the valuation and the price; andcommunicating at least some of the output, including the one of thevaluation and the price, to an other computer system.
 2. The method ofclaim 1, wherein the interest in the securitized reusable tangiblepersonal asset is an equity interest in the securitized reusabletangible personal asset.
 3. The method of claim 1, wherein each of theterm of years interest and the remainder interest is a vested interest.4. The method of claim 2, wherein each of the term of years interest andthe remainder interest is a vested interest and the at least onesecurity is the interest in the securitized reusable tangible personalasset.
 5. A method of using an apparatus to generate output supportingan asset transaction, comprising: receiving, at a processor of acomputer system, input data associated with at least one security,wherein said at least one security includes an interest in a securitizedreusable tangible personal asset, the securitized reusable tangiblepersonal asset having one component that is a securitized deeded term ofyears interest and another component that is a securitized deededremainder interest, wherein the interest in the securitized reusabletangible personal asset is an interest in only one member of a group ofassets with two members, wherein the group of assets includes said onecomponent and said another component; and controlling the processor toproduce, using at least some of the input data, output including a bidfor at least some of the at least one security, wherein the at leastsome of the at least one security includes at least some of the interestin the securitized reusable tangible asset, and to communicate at leastsome of the output, including the bid, to a securities transactioncomputer system.
 6. The method of claim 5, wherein the interest in thesecuritized reusable tangible personal asset is an equity interest inthe securitized reusable tangible personal asset.
 7. The method of claim5, wherein each of the term of years interest and the remainder interestis a vested interest.
 8. The method of claim 6, wherein each of the termof years interest and the remainder interest is a vested interest andthe at least one security is the interest in the securitized reusabletangible personal asset.
 9. A method of using an apparatus to generateoutput supporting an asset transaction, comprising: receiving, at aprocessor of a computer system, input data associated with at least onesecurity, wherein said at least one security includes an interest in asecuritized reusable tangible personal asset, the securitized reusabletangible personal asset having one component that is a securitizeddeeded term of years interest and another component that is asecuritized deeded remainder interest, wherein the interest in thesecuritized reusable tangible personal asset is an interest in only onemember of a group of assets with two members, wherein the group ofassets includes said one component and said another component; andcontrolling the processor to produce, using at least some of the inputdata, output including an offer to sell at least some of the at leastone security, wherein the at least some of the at least one securityincludes at least some of the interest in the securitized reusabletangible asset, and to communicate at least some of the output,including the offer, to a securities transaction computer system. 10.The method of claim 7, wherein the interest in the securitized reusabletangible personal asset is an equity interest in the securitizedreusable tangible personal asset.
 11. The method of claim 7, whereineach of the term of years interest and the remainder interest is avested interest.
 12. The method of claim 10, wherein each of the term ofyears interest and the remainder interest is a vested interest and theat least one security is the interest in the securitized reusabletangible personal asset.
 13. A method of using an apparatus to generateoutput supporting an asset transaction, comprising: receiving, at aprocessor of a computer system, input data associated with an interestin a securitized component of a reusable personal asset, the assethaving a first component that is a deeded term of years interest and asecond component that is a deeded remainder interest, wherein theinterest in the securitized component reflects an interest in only onemember of a group of assets with two members, the group of assetsincluding said first component and said second component, the input datacomprising a bid for the interest in the securitized component;controlling the processor to compute, using at least some of the inputdata, a valuation of at least some of the interest in the securitizedcomponent in consummating a sale of the at least some of the interest inthe securitized component at a price corresponding to the valuation andto generate output including one of the valuation and the price; andcommunicating at least some of the output, including the one of thevaluation and the price, to an other computer system.
 14. The method ofclaim 13, wherein the interest in the securitized component is an equityinterest in the securitized component.
 15. The method of claim 13,wherein the reusable personal asset is a tangible asset.
 16. The methodof claim 14, wherein the reusable personal asset is a tangible asset.17. The method of claim 13, wherein each of the term of years interestand the remainder interest is a vested interest.
 18. The method of claim14, wherein each of the term of years interest and the remainderinterest is a vested interest.
 19. The method of claim 15, wherein eachof the term of years interest and the remainder interest is a vestedinterest.
 20. The method of claim 16, wherein each of the term of yearsinterest and the remainder interest is a vested interest.
 21. A methodof using an apparatus to generate output supporting an assettransaction, comprising: receiving, at a processor of a computer system,input data associated with an interest in a securitized component of areusable personal asset, the asset having a first component that is adeeded term of years interest and a second component that is a deededremainder interest, wherein the interest in the securitized componentreflects an interest in only one member of a group of assets with twomembers, the group of assets including said first component and saidsecond component; and controlling the processor to produce, using atleast some of the input data, output including a bid for at least someof the interest in the securitized component, and to communicate atleast some of the output, including the bid, to a securities transactioncomputer system.
 22. The method of claim 21, wherein the interest in thesecuritized component is an equity interest in the securitizedcomponent.
 23. The method of claim 21, wherein the reusable personalasset is a tangible asset.
 24. The method of claim 22, wherein thereusable personal asset is a tangible asset.
 25. The method of claim 21,wherein each of the term of years interest and the remainder interest isa vested interest.
 26. The method of claim 22, wherein each of the termof years interest and the remainder interest is a vested interest. 27.The method of claim 23, wherein each of the term of years interest andthe remainder interest is a vested interest.
 28. The method of claim 24,wherein each of the term of years interest and the remainder interest isa vested interest.
 29. A method of using an apparatus to generate outputsupporting an asset transaction, comprising: receiving, at a processorof a computer system, input data associated with an interest in asecuritized component of a reusable personal asset, the asset having afirst component that is a deeded term of years interest and a secondcomponent that is a deeded remainder interest, wherein the interest inthe securitized component reflects an interest in only one member of agroup of assets with two members, the group of assets including saidfirst component and said second component; and controlling the processorto produce, using at least some of the input data, output including anoffer to sell at least some of the interest in the securitizedcomponent, and to communicate at least some of the output, including theoffer, to a securities transaction computer system.
 30. The method ofclaim 29, wherein the interest in the securitized component is an equityinterest in the securitized component.
 31. The method of claim 29,wherein the reusable personal asset is a tangible asset.
 32. The methodof claim 30, wherein the reusable personal asset is a tangible asset.33. The method of claim 29, wherein each of the term of years interestand the remainder interest is a vested interest.
 34. The method of claim30, wherein each of the term of years interest and the remainderinterest is a vested interest.
 35. The method of claim 31, wherein eachof the term of years interest and the remainder interest is a vestedinterest.
 36. The method of claim 32, wherein each of the term of yearsinterest and the remainder interest is a vested interest.
 37. A methodof using an apparatus to generate output supporting an assettransaction, comprising: receiving, at a processor of a computer system,input data associated with an interest in a securitized deeded componentof a personal asset, the asset comprising a reusable personal asset, thedeeded component reflecting a deed to a qualified fee interest in thereusable personal asset, the input data comprising a bid for theinterest in the securitized deeded component; controlling the processorto compute, using at least some of the input data, a valuation of atleast some of the interest in the securitized deeded component inconsummating a sale of the at least some of the interest in thesecuritized deeded component at a price corresponding to the valuationand to generate output including one of the valuation and the price; andcommunicating at least some of the output, including the one of thevaluation and the price, to an other computer system.
 38. The method ofclaim 37, wherein the interest in the securitized deeded component is anequity interest in the securitized deeded component.
 39. The method ofclaim 37, wherein the reusable personal asset is a tangible asset. 40.The method of claim 38, wherein the reusable personal asset is atangible asset.
 41. The method of claim 37, wherein the deed to the feeinterest includes an express covenant specifying the legal jurisdictionthat defines the property rights in the deed.
 42. The method of claim38, wherein the deed to the fee interest includes an express covenantspecifying the legal jurisdiction that defines the property rights inthe deed.
 43. The method of claim 39, wherein the deed to the feeinterest includes an express covenant specifying the legal jurisdictionthat defines the property rights in the deed.
 44. The method of claim40, wherein the deed to the fee interest includes an express covenantspecifying the legal jurisdiction that defines the property rights inthe deed.
 45. The method of claim 37, wherein the deed includes anexpress covenant restricting one of each transferee of the fee interestand each recording of the deed.
 46. The method of claim 38, wherein thedeed includes an express covenant restricting one of each transferee ofthe fee interest and each recording of the deed.
 47. The method of claim39, wherein the deed includes an express covenant restricting one ofeach transferee of the fee interest and each recording of the deed. 48.The method of claim 40, wherein the deed includes an express covenantrestricting one of each transferee of the fee interest and eachrecording of the deed.
 49. A method of using an apparatus to generateoutput supporting an asset transaction, comprising: receiving, at aprocessor of a computer system, input data associated with an interestin a securitized deeded component of a personal asset, the assetcomprising a reusable personal asset, the deeded component reflecting adeed to a qualified fee interest in the reusable personal asset;controlling the processor to produce, using at least some of the inputdata, output including a bid for at least some of the interest in thesecuritized deeded component, and to communicate at least some of theoutput, including the bid, to a securities transaction computer system.50. The method of claim 49, wherein the interest in the securitizeddeeded component is an equity interest in the securitized deededcomponent.
 51. The method of claim 49, wherein the reusable personalasset is a tangible asset.
 52. The method of claim 50, wherein thereusable personal asset is a tangible asset.
 53. The method of claim 49,wherein the deed to the fee interest includes an express covenantspecifying the legal jurisdiction that defines the property rights inthe deed.
 54. The method of claim 50, wherein the deed to the feeinterest includes an express covenant specifying the legal jurisdictionthat defines the property rights in the deed.
 55. The method of claim51, wherein the deed to the fee interest includes an express covenantspecifying the legal jurisdiction that defines the property rights inthe deed.
 56. The method of claim 52, wherein the deed to the feeinterest includes an express covenant specifying the legal jurisdictionthat defines the property rights in the deed.
 57. The method of claim49, wherein the deed includes an express covenant restricting one ofeach transferee of the fee interest and each recording of the deed. 58.The method of claim 50, wherein the deed includes an express covenantrestricting one of each transferee of the fee interest and eachrecording of the deed.
 59. The method of claim 51, wherein the deedincludes an express covenant restricting one of each transferee of thefee interest and each recording of the deed.
 60. The method of claim 52,wherein the deed includes an express covenant restricting one of eachtransferee of the fee interest and each recording of the deed.
 61. Amethod of using an apparatus to generate output supporting an assettransaction, comprising: receiving, at a processor of a computer system,input data associated with an interest in a securitized deeded componentof a personal asset, the asset comprising a reusable personal asset, thedeeded component reflecting a deed to a qualified fee interest in thereusable personal asset; controlling the processor to produce, using atleast some of the input data, output including an offer to sell at leastsome of the interest in the securitized deeded component, and tocommunicate at least some of the output, including the offer, to asecurities transaction computer system.
 62. The method of claim 61,wherein the interest in the securitized deeded component is an equityinterest in the securitized deeded component.
 63. The method of claim61, wherein the reusable personal asset is a tangible asset.
 64. Themethod of claim 62, wherein the reusable personal asset is a tangibleasset.
 65. The method of claim 61, wherein the deed to the fee interestincludes an express covenant specifying the legal jurisdiction thatdefines the property rights in the deed.
 66. The method of claim 62,wherein the deed to the fee interest includes an express covenantspecifying the legal jurisdiction that defines the property rights inthe deed.
 67. The method of claim 63, wherein the deed to the feeinterest includes an express covenant specifying the legal jurisdictionthat defines the property rights in the deed.
 68. The method of claim64, wherein the deed to the fee interest includes an express covenantspecifying the legal jurisdiction that defines the property rights inthe deed.
 69. The method of claim 61, wherein the deed includes anexpress covenant restricting one of each transferee of the fee interestand each recording of the deed.
 70. The method of claim 62, wherein thedeed includes an express covenant restricting one of each transferee ofthe fee interest and each recording of the deed.
 71. The method of claim63, wherein the deed includes an express covenant restricting one ofeach transferee of the fee interest and each recording of the deed. 72.The method of claim 64, wherein the deed includes an express covenantrestricting one of each transferee of the fee interest and eachrecording of the deed.
 73. The method of any one of claims 1, 5, 9,further including: providing financial risk reduction insurance for theinterest in the securitized reusable tangible personal asset; generatingdocumentation for the financial risk reduction insurance; and producingthe documentation at an output device.
 74. A method of using anapparatus to generate output, the method including: receiving, at aprocessor of a computer system, input data associated with an interestin a securitized reusable personal asset, the securitized reusablepersonal asset having one component that is a securitized deeded term ofyears interest and another component that is a securitized deededremainder interest, wherein the interest in the securitized reusablepersonal asset is an interest in only one member of a group of assetswith two members, wherein the group of assets includes said onecomponent and said another component; providing financial risk reductioninsurance for at least some of the interest in the securitized reusablepersonal asset, wherein the providing uses at least some of the inputdata; controlling the processor to generate output includingdocumentation for the financial risk reduction insurance; and producingthe output at an output device.
 75. The method of claim 74, wherein theinterest in the securitized reusable personal asset is an equityinterest in the securitized reusable personal asset.
 76. The method ofany one of claims 13, 21, 29, 37, 49, 61, further including: providingfinancial risk reduction insurance for at least some of the interest inthe securitized component; generating documentation for the financialrisk reduction insurance; and producing the documentation at an outputdevice.
 77. A method of using an apparatus to generate output,including: receiving, at a processor of a computer system, input dataassociated with an interest in a securitized component of a reusablepersonal asset, the asset having a first component that is a deeded termof years interest and a second component that is a deeded remainderinterest, wherein the interest in the securitized component reflects aninterest in only one member of a group of assets with two members,wherein the group of assets includes said first and second components;providing financial risk reduction insurance for at least some of theinterest in a securitized component, the providing using at least someof the input data; controlling the processor to generate outputincluding documentation for the financial risk reduction insurance; andproducing the output at an output device.
 78. The method of claim 77,wherein the interest in the securitized component is an equity interestin the securitized component.
 79. A method of using an apparatus togenerate output, including: receiving, at a processor of a computersystem, input data associated with an interest in a securitized deededcomponent of a personal asset, the asset comprising a reusable personalasset, the deeded component reflecting a deed to a qualified feeinterest in the reusable personal asset; providing financial riskreduction insurance for at least some of the interest in the securitizeddeeded component, the providing using at least some of the input data;controlling the processor to generate output including documentation forthe financial risk reduction insurance; and producing the output at anoutput device.
 80. The method of claim 79, wherein the interest in thesecuritized deeded component is an equity interest in the securitizeddeeded component.
 81. An apparatus, comprising: a computer systemadapted to carry out the operations of: receiving, at a processor of thecomputer system, input data associated with at least one security,wherein said at least one security includes an interest in a securitizedreusable tangible personal asset, the securitized asset having onecomponent that is a securitized deeded term of years interest andanother component that is a securitized deeded remainder interest,wherein the interest in the securitized reusable tangible personal assetis an interest in only one member of a group of assets with two members,wherein the group of assets includes said one component and said anothercomponent, the input data comprising a bid for the at least onesecurity; controlling the processor to compute, using at least some ofthe input data, a valuation of at least some of the at least onesecurity, wherein the at least some of the at least one securityincludes at least some of the interest in the securitized reusabletangible personal asset, in facilitating consummation of a sale of theat least some of the at least one security at a price corresponding tothe valuation and to generate output including one of the valuation andthe price; and communicating at least some of the output, including theone of the valuation and the price, to an other computer system.
 82. Anapparatus, comprising: a computer system adapted to carry out theoperations of: receiving, at a processor of the computer system, inputdata associated with at least one security, wherein said at least onesecurity includes an interest in a securitized reusable tangiblepersonal asset, the securitized asset having one component that is asecuritized deeded term of years interest and another component that isa securitized deeded remainder interest, wherein the interest in thesecuritized reusable tangible personal asset is an interest in only onemember of a group of assets with two members, wherein the group ofassets includes said one component and said another component;controlling the processor to perform, using at least some of the inputdata, one operation in a group of operations with two members, themembers of the group comprising producing output including a bid for atleast some of the at least one security and producing output includingan offer to sell the at least some of the at least one security, whereinthe at least some of the at least one security includes at least some ofthe interest in the securitized reusable tangible asset; andcommunicating the output produced by the one operation to a securitiestransaction computer system.
 83. An apparatus, comprising: a computersystem adapted to carry out the operations of: receiving, at a processorof the computer system, input data associated with an interest in asecuritized component of a reusable personal asset, the asset having afirst component that is a deeded term of years interest and a secondcomponent that is a deeded remainder interest, wherein the interest inthe securitized component reflects an interest in only one member of agroup of assets with two members, the group of assets including saidfirst component and said second component, the input data comprising abid for the interest in the securitized component; controlling theprocessor to compute, using at least some of the input data, a valuationof at least some of the interest in the securitized component inconsummating a sale of the at least some of the interest in thesecuritized component at a price corresponding to the valuation and togenerate output including one of the valuation and the price; andcommunicating at least some of the output, including the one of thevaluation and the price, to an other computer system.
 84. An apparatus,comprising: a computer system adapted to carry out the operations of:receiving, at a processor of the computer system, input data associatedwith an interest in a securitized component of a reusable personalasset, the asset having a first component that is a deeded term of yearsinterest and a second component that is a deeded remainder interest,wherein the interest in the securitized component reflects an interestin only one member of a group of assets with two members, the group ofassets including said first component and said second component; andcontrolling the processor to produce, using at least some of the inputdata, output including a bid for at least some of the interest in thesecuritized component, and to communicate at least some of the output,including the bid, to a securities transaction computer system.
 85. Anapparatus, comprising: a computer system adapted to carry out theoperations of: receiving, at a processor of the computer system, inputdata associated with an interest in a securitized component of areusable personal asset, the asset having a first component that is adeeded term of years interest and a second component that is a deededremainder interest, wherein the interest in the securitized componentreflects an interest in only one member of a group of assets with twomembers, the group of assets including said first component and saidsecond component; and controlling the processor to produce, using atleast some of the input data, output including an offer to sell at leastsome of the interest in the securitized component, and to communicate atleast some of the output, including the offer, to a securitiestransaction computer system.
 86. An apparatus, comprising: a computersystem adapted to carry out the operations of: receiving, at a processorof the computer system, input data associated with an interest in asecuritized deeded component of a personal asset, the asset comprising areusable personal asset, the deeded component reflecting a deed to aqualified fee interest in the reusable personal asset, the input datacomprising a bid for the interest in the securitized deeded component;controlling the processor to compute, using at least some of the inputdata, a valuation of at least some of the interest in the securitizeddeeded component in consummating a sale of the at least some of theinterest in the securitized deeded component at a price corresponding tothe valuation and to generate output including one of the valuation andthe price; and communicating at least some of the output, including theone of the valuation and the price, to an other computer system.
 87. Anapparatus, comprising: a computer system adapted to carry out theoperations of: receiving, at a processor of the computer system, inputdata associated with an interest in a securitized deeded component of apersonal asset, the asset comprising a reusable personal asset, thedeeded component reflecting a deed to a qualified fee interest in thereusable personal asset; and controlling the processor to produce, usingat least some of the input data, output including a bid for at leastsome of the interest in the securitized deeded component, and tocommunicate at least some of the output, including the bid, to asecurities transaction computer system.
 88. An apparatus, comprising: acomputer system adapted to carry out the operations of: receiving, at aprocessor of the computer system, input data associated with an interestin a securitized deeded component of a personal asset, the assetcomprising a reusable personal asset, the deeded component reflecting adeed to a qualified fee interest in the reusable personal asset; andcontrolling the processor to produce, using at least some of the inputdata, output including an offer to sell at least some of the interest inthe securitized deeded component, and to communicate at least some ofthe output, including the offer, to a securities transaction computersystem.
 89. An apparatus, comprising: a computer system adapted to carryout the operations of: receiving, at a processor of the computer system,input data associated with an equity interest in a securitized reusablepersonal asset, the asset having one component that is a securitizeddeeded term of years interest and another component that is asecuritized deeded remainder interest, wherein the interest in thesecuritized reusable personal asset is an interest in only one member ofa group of assets with two members, wherein the group of assets includessaid one component and said another component; providing financial riskreduction insurance for at least some of the interest in the securitizedreusable personal asset, wherein the providing uses at least some of theinput data; controlling the processor to generate output includingdocumentation for the financial risk reduction insurance; and producingthe output at an output device.
 90. An apparatus, comprising: a computersystem adapted to carry out the operations of: receiving, at a processorof the computer system, input data associated with an equity interest ina securitized component of a reusable personal asset, the asset having afirst component that is a deeded term of years interest and a secondcomponent that is a deeded remainder interest, wherein the interest inthe securitized component reflects an interest in only one member of agroup of assets with two members, the group of assets including saidfirst component and said second component; providing financial riskreduction insurance for at least some of the interest in a securitizedcomponent, wherein the providing uses at least some of the input data;controlling the processor to generate output including documentation forthe financial risk reduction insurance; and producing the output at anoutput device.
 91. An apparatus, comprising: a computer system adaptedto carry out the operations of: receiving, at a processor of thecomputer system, input data associated with an equity interest in asecuritized deeded component of a personal asset, the asset comprising areusable personal asset, the deeded component reflecting a deed to aqualified fee interest in the reusable personal asset; providingfinancial risk reduction insurance for at least some of the interest inthe securitized deeded component, wherein the providing uses at leastsome of the input data; controlling the processor to generate outputincluding documentation for the financial risk reduction insurance;producing the output at an output device.
 92. A method of using anapparatus to generate output, comprising: receiving, at a processor of acomputer system, input data associated with at least one security,wherein said at least one security includes an interest in a securitizedreusable tangible personal asset, the securitized reusable tangiblepersonal asset having one component that is a securitized deeded term ofyears interest and another component that is a securitized deededremainder interest, wherein the interest in the securitized reusabletangible personal asset is an interest in only one member of a group ofassets with two members, wherein the group of assets includes said onecomponent and said another component; controlling the processor toperform, using at least some of the input data, one operation in a groupof operations with four members, the members of the group comprising:computing a valuation of the at least one security in consummating asale of the at least one security at a price corresponding to thevaluation and producing output including one of the valuation and theprice, producing output including a bid for the at least one security,producing output including an offer to sell the at least one security,and providing financial risk reduction insurance for the at least onesecurity and producing output including documentation for the financialrisk reduction insurance; and communicating the output produced by theone operation to an other computer system.
 93. The method of claim 92,wherein the receiving includes the input data comprising the bid for theat least one security, and wherein the one operation is the computing avaluation of the at least one security in consummating a sale of the atleast one security at a price corresponding to the valuation andproducing output including one of the valuation and the price.
 94. Themethod of claim 92, wherein the one operation is the producing outputincluding a bid for the at least one security.
 95. The method of claim92, wherein the one operation is the producing output including an offerto sell the at least one security.
 96. The method of claim 92, whereinthe one operation is the providing financial risk reduction insurancefor the at least one security and producing output includingdocumentation for the financial risk reduction insurance.
 97. The methodof any one of claims 93-96, wherein the interest in the securitizedreusable tangible personal asset is an equity interest in thesecuritized reusable tangible personal asset.
 98. A method of using anapparatus to generate output supporting an asset transaction,comprising: receiving, at a processor of a computer system, input dataassociated with an interest in a securitized version of a deededcomponent of a personal asset, the personal asset comprising a reusablepersonal asset, the deeded component reflecting a deed to a qualifiedfee interest in the reusable personal asset; controlling the processorto perform, using at least some of the input data, one operation in agroup of operations with four members, the members of the groupcomprising: computing a valuation of at least some of the interest inthe securitized version of the deeded component in consummating a saleof the at least some of the interest in the securitized version of thedeeded component at a price corresponding to the valuation and producingoutput including one of the valuation and the price, producing outputincluding a bid for the at least some of the interest in the securitizedversion of the deeded component, producing output including an offer tosell the at least some of the interest in the securitized version of thedeeded component, and providing financial risk reduction insurance forthe at least some of the interest in the securitized version of thedeeded component and producing output including documentation for thefinancial risk reduction insurance; and communicating the outputproduced by the one operation to an other computer system.
 99. Themethod of claim 98, wherein the receiving includes receiving the inputdata comprising the bid for the interest in the securitized version ofthe deeded component, and wherein the one operation is the computing avaluation of at least some of the interest in the securitized version ofthe deeded component in consummating a sale of the at least some of theinterest in the securitized version of the deeded component at a pricecorresponding to the valuation and producing output including one of thevaluation and the price.
 100. The method of claim 98, wherein the oneoperation is the producing output including a bid for the at least someof the interest in the securitized version of the deeded component. 101.The method of claim 98, wherein the one operation is the producingoutput including an offer to sell the at least some of the interest inthe securitized version of the deeded component.
 102. The method ofclaim 98, wherein the one operation is the providing financial riskreduction insurance for the at least some of the interest in thesecuritized version of the deeded component and producing outputincluding documentation for the financial risk reduction insurance. 103.The method of any one of claims 13, 21, 29, 37, 49, 61, wherein thereusable personal asset includes at least one mobile air right.
 104. Themethod of any one of claims 1-4, 13-20, 37-48, wherein the at least someof the output includes a financial document.
 105. The method of any oneof claims 99-102, wherein the interest in the securitized version of thedeeded component is an equity interest in the securitized version of thedeeded component.
 106. An apparatus, comprising: a first computersystem, including a first processor controlled to receive first inputrepresenting data associated with an interest in a securitized deededcomponent of a personal asset, the asset comprising a reusable personalasset, the deeded component reflecting a deed to a qualified feeinterest in the reusable personal asset, to produce, using at least someof the first input, first output including a bid for at least some ofthe interest in the securitized deeded component, and to communicate atleast some of the first output including the bid to a second computersystem, including a second processor controlled to receive one of the atleast some of the first output and another at least some of the firstoutput as second input, wherein said second input includes the bid, togenerate, using at least some of the second input, a valuation of one ofthe at least some of the interest in the securitized deeded componentand another at least some of the interest in the securitized deededcomponent, to consummate a sale of the one of the at least some of theinterest in the securitized deeded component and the another at leastsome of the interest in the securitized deeded component at a pricecorresponding to the valuation, to produce second output including oneof the valuation and the price, and to communicate at least some of thesecond output, including the one of the valuation and the price, to oneof the first computer system and an other computer system.
 107. Anapparatus, comprising: a first computer system adapted to carry out theoperations of receiving, at a first processor of the first computersystem, first input representing data associated with an interest in asecuritized deeded component of a personal asset, the asset comprising areusable personal asset, the deeded component reflecting a deed to aqualified fee interest in the reusable personal asset, producing, usingat least some of the first input, first output including a bid for atleast some of the interest in the securitized deeded component, andcommunicating at least some of the first output including the bid to asecond computer system, including a second processor, adapted to carryout the operations of receiving one of the at least some of the firstoutput and another at least some of the first output as second input,wherein said second input includes the bid, controlling the secondprocessor to compute, using at least some of the second input, avaluation of one of the at least some of the interest in the securitizeddeeded component and another at least some of the interest in thesecuritized deeded component in consummating a sale of the one of the atleast some of the interest and the another at least some of the interestat a price corresponding to the valuation and to generate second outputincluding one of the valuation and the price, and communicating at leastsome of the second output, including the one of the valuation and theprice, to one of the first computer system and an other computer system.108. The apparatus of any one of claims 106, 107, wherein the apparatusincludes another computer system, including another processor controlledto receive another input representing one of the data associated withthe interest in the securitized deeded component and another dataassociated with the interest in the securitized deeded component, toproduce, using at least some of the another input, another outputincluding an offer to sell at least some of the interest in thesecuritized deeded component, and to communicate at least some of theanother output, including the offer, to one of the first computer systemand the second computer system.
 109. The apparatus of any one of claims106, 107, wherein the second processor of the second computer system iscontrolled to generate an offering document for the interest in thesecuritized component and to communicate the offering document to thefirst computer system.
 110. The apparatus of claim 108, wherein at leastone of the second computer system and the another computer system iscontrolled to generate an offering document for the interest in thesecuritized component and to communicate the offering document to thefirst computer system.
 111. The method of any one of claims 1-4, 37-48,wherein the at least some of the output includes a financial documentincluding one of the valuation and the price.
 112. The method of any oneof claims 5-8, wherein the receiving includes receiving digital datacomprising an offering document for the at least one security from another computer system.
 113. The method of any one of claims 21-28,49-60, wherein the receiving includes receiving digital data comprisingan offering document for the interest in the securitized component froman other computer system.
 114. The apparatus of any one of claims 81,82, 83, 84, 86, 87, wherein the receiving input data includes receivingdigital data comprising one of the at least some of the input data andanother at least some of the input data from another computer system.115. The apparatus of any one of claims 84, 87, wherein the receivinginput data includes receiving digital data comprising an offeringdocument for the interest in the securitized component from an othercomputer system.
 116. The method of any one of claims 92, 98, whereinthe output includes a financial document.
 117. A method of using anapparatus to generate output supporting an asset transaction,comprising: receiving, at a processor of a computer system from anothercomputer system, input data associated with an equity interest in asecuritized deeded component of a personal asset, the asset comprising areusable personal asset, the deeded component reflecting a deed to aqualified fee interest in the reusable personal asset, the input datacomprising a bid for the interest in the securitized deeded component;controlling the processor to compute, using at least some of the inputdata, a valuation of at least some of the interest in the securitizeddeeded component in consummating a sale of the at least some of theinterest in the securitized deeded component at a price corresponding tothe valuation and to generate output including a financial documentincluding one of the valuation and the price; and communicating at leastsome of the output, including the financial document, over a computernetwork of a securities distribution system.
 118. The method of 98,wherein the interest in the securitized version of the deeded componentof the personal asset is comprised of at least one security.
 119. Themethod of 98, wherein the interest in the securitized version of thedeeded component of the personal asset is at least one security. 120.The method of claim 92, wherein the receiving input data includesreceiving digital data comprising the at least some of the input datafrom an other computer system.
 121. The method of claim 98, wherein thereceiving input data includes receiving digital data comprising the atleast some of the input data from an other computer system.